Following COVID-19 induced shutdowns, consumers and the economy as a whole bounced back in a big way, snatching up automobiles, houses, and various other goods at a rapid rate – sending the prices of those goods soaring to new heights amid short supply. As a result, the Federal Reserve has raised interest rates several times recently in an attempt to calm rapid inflation – though many have also worried that such moves could send the country into an economic recession. However, that’s apparently something that Ford is prepared for, as it is already planning for recessions not only in the U.S. – but also Europe.
“Our adjusted EBIT guidance includes various headwinds and tailwinds that we believe could impact our business in the coming year,” Ford CFO John Lawler said while speaking on the automaker’s Q4 earnings call with investors. “For example, headwinds include an expected mild recession in the U.S., and a moderate recession in Europe, higher industry incentives as supply and demand come back into balance, Ford Credit EBT of about $1.3 billion, and that’s about $1.4 billion lower than in 2022, reflecting lower lease residuals and credit losses and the non-reoccurrence of derivative gains.”
The signs that recessions could be looming in both of these parts of the world have existed for months now, with buyers slowly turning to less expensive vehicles as prices continue to reach new record highs and consumer debt keeps climbing. At the same time, Ford CEO Jim Farley expects average transaction prices to fall in the coming months, due to this factor, improved inventory, and potentially declining sales.
On the bright side, Farley also recently stated that demand for EVs and commercial vehicles remains high in the U.S., as well as Europe – while Ford Pro CEO Ted Cannis confirmed that the automaker continues to face strong demand for its commercial offerings, too.
We’ll have more on Ford’s economic strategy soon, so be sure and subscribe to Ford Authority for ongoing Ford news coverage.
Comments
This article is ripe for a comment from the K-street FUDster tag team’s Project Travis regaling us on how class 8 OTR diesels have essentially the same use case as the Lightning and how his company bought C8 OTR units and he convinced everybody else to do so too.
Then the amping comments from his colleagues telling how things got so out of hand the fleet manager had to be protected from the electric truck sales boy in the skinny jeans.
In any good ol fashioned dust-up…. he who gets the first punch in usually wins. Nicely played😜
Industry of all types is working hard to put a good spin on the way forward financially. I suspect the smart money has already moved on leaving far too many consumers taking a hit soon. Interest rates ‘give’ and interest rates (take it all away). The Ford plan in the article sounds a little thin on meaningful thoughts… it will hurt more than Ford will admit.
Fortunately for Ford, as an aggressive 2nd wave first mover, they secured their BEV investment funds and lines of credit when interest rates were low.
Those that are behind ford, or scrambling to develop a plan and the tech, (I.e. Toyota) are going to have higher costs of capital even as their ICE cash cow profits dry up as the market shifts toward BEV (declining demand will drive above average incentive costs.)
Just as I predicted!