Ford stock (F) is moving to the upside on Thursday after the automaker reported a top-line beat and reaffirmed the lower end of its full-year earnings forecast.
However, the automaker still sees some headwinds coming in the form of economic uncertainty and higher rates, which are reflected in its business.
“We’re starting to see some signs that inflation and higher prices are affecting the consumer,” Ford CFO John Lawler told Yahoo Finance Live (video above). , or that a discount compared to the suggested retail price is somewhat higher.”
He added that amid “the overall macroeconomic environment — the inflation and what the consumer is facing — we’re starting to see it go through some milestones for us as a business.”
With the economy slowing down, many buyers are trying different ways to get a new car, even if that means getting creative with financing.
“We’re also seeing consumers looking for longer-term loans, 84 months and beyond, because the payments are higher,” Lawler said. “They’re trying to keep that payment in a range that they think is affordable.”
Inflation costs ‘hitting our business’
Inflation isn’t just affecting Ford’s consumers — the company is also experiencing the impact of higher prices for parts, materials, and other business costs.
As a result, Ford warned last month that an additional $1 billion in higher costs would cut into earnings in the quarter, which came in at $1.7 billion with an adjusted EBIT (earnings before interest and taxes) of basis for Q3.
“We’ve seen cost inflation hit our business,” Lawler said. “We saw that in the third quarter. We continue to see that. Labor is tight. Supply chains, ocean freight and domestic freight are very expensive right now. We’re seeing it across the board.”
Ford also mentioned in its third-quarter earnings report that it will liquidate the Argo AI autonomous driving joint venture. The company said it will take a $2.7 billion non-cash, pretax impairment on its investment in Argo AI, with engineers and other employees being absorbed by Ford and its Argo AI partner, Volkswagen.
“When we looked at the business opportunity here, we saw that the arc to a scaled-up, profitable business was a long way out — 5 years-plus out,” Lawler said of level 4 and level 5 autonomous services. “[Ford technologists] believe there are many obstacles that need to be overcome.”
Ford’s strategy for autonomous moving forward will prioritize level 2 and level 3 autonomy, which will require some driver interaction and possibly allow for use on highways or similar types of roads. Some of these services are already offered with its Blue Cruise technology, currently at level 2.
And technology isn’t the only thing that needs fixing, Lawler added. This is also the number of vehicles needed to scale up an autonomous service across the country and depots that need to be built to service the autonomous vehicles.
“It’s very expensive and will take a lot of money to build,” he said. “It will take some time in our opinion.”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him Twitter and in Instagram.
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