Hello, Ford team.
We reported our first quarter 2021 financial results on Wednesday. Our press release and a video message from me explaining the results are on @FordOnline. You can listen to a replay of the call Jim Farley and I had with stock analysts; it will be online by around 8 p.m. Wednesday (Dearborn time). We’re a better company when the whole team knows what Ford is doing, so please read and listen to that information.
If you have questions or comments, send me an email.
The first quarter of 2021 provided more proof that our plan to turn around and grow the company – and create a Ford+ experience for customers – is working. We reported revenue of $36.2 billion, up 6% from last year’s first quarter; net income of $3.3 billion; and adjusted earnings before interest and taxes – or EBIT – $4.8 billion. Our adjusted EBIT included a $902 million noncash gain from our investment in Rivian. Our warranty costs improved by more than $400 million, which is good for customers and for the company.
Despite the strong EBIT, adjusted free cash flow was negative $396 million, primarily because of the temporary effects of adverse timing differences and higher inventory as a result of the global semiconductor shortage.
These results show that we’re executing better and giving customers exciting, must-have products, like Mustang Mach-E, the all-new F-150 and Bronco Sport. Pricing for our vehicles was exceptionally strong, because of healthy demand and tight dealer inventories. Together, those factors contributed to one of our most profitable quarters in years.
Of course, lower dealer stocks are being aggravated by production interruptions caused by the global shortage of semiconductors, along with lingering effects of the global pandemic. The Ford team is skillfully managing those issues, but the shortages are obviously significant.
All Ford business units contributed to our improved Q1 results:
- North America revenue was up 5% to $23 billion and the EBIT margin was almost 13%. Two-thirds of online reservations of Mustang Mach-E and a similar rate for the all-new Bronco are being converted to orders.
- Europe nearly doubled revenue and generated a 4.8% EBIT margin, reversing an operating loss a year ago. In February, announced plans to invest $1 billion to create an electrification center in Cologne, on the way to making 100% of our passenger vehicles and two-thirds of our commercial vehicles in Europe all-electric by 2030.
- China reported its fourth straight quarter of year-over-year EBIT improvement, as Lincoln had its best-ever first-quarter sales in the region. At last week’s Shanghai Auto Show, we showed off additional new vehicles: the Escape plug-in hybrid SUV, a local version of the all-electric Mustang Mach-E and the fully networked EVOS.
- South America has improved results for the sixth consecutive quarter as the significant restructuring of our business there proceeded as planned. The Ranger pickup, our flagship vehicle in the region, gained two points of share.
- The International Markets Group reduced its structural costs 18% while achieving our highest quarterly EBIT to date. We disclosed plans to invest $1 billion in expanding and modernizing the Silverton, South Africa, plant where IMG builds Ranger for export to over 100 countries.
- Ford Mobility and Argo AI are simulating ride-hail and delivery operations in six U.S. cities ahead of customer pilot programs scheduled to start later this year. Our Spin subsidiary improved per-trip economics more than 60% from first-quarter 2020.
- Ford Credit remained strong, with EBT of $1 billion, up from both a year ago, when the business accounted for anticipated pandemic-related effects, and the fourth quarter of 2020.
We expect semiconductor availability to get worse before it improves, bottom out during the second quarter, but be with us at least through the second half of the year.
The trajectory of our underlying business is strong. Coming into 2021, we expected to generate $8 billion to $9 billion in full-year adjusted EBIT. The team is doing a great job allocating semiconductor supplies to our most in-demand and profitable vehicles and finding other ways to offset effects on revenue and profitability, but the semiconductor shortage has grown and we now anticipate losing about 1.1 million units of full-year production. Including the adverse effects of semiconductors, we now expect adjusted EBIT to be between $5.5 billion and $6.5 billion.
In the meantime, let’s devote our attention to the things we control, including increasing the efficiency and effectiveness of every part of our operations and always taking care of customers.
Those customers are increasingly counting on us, not only for our products and services. The research company Morning Consult last week reported Ford among the top companies gaining U.S. consumer trust. The ranking was attributed, at least in part, to the work our team did engineering, producing and distributing millions of pieces of equipment to protect communities – along with which other and our business – amid the COVID-19 pandemic. That’s an example of the kind of always-on Ford+ relationship with customers that we envision and they deserve – with solutions and experiences that are great to start with and get better over time.
I appreciate what you’re doing to win for our customers and company. Headwinds from outside Ford will continue to make things bumpy for us for a while longer. Let’s keep moving forward, knowing that the direction we’re going is the right one.