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Ford’s Mustang Mach-E Profit Wiped Out by Commodity Costs

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Ford Motor Co.’s hot-selling Mustang Mach-E electric SUV and other plug-in models are being rendered unprofitable by rising raw material costs.

 

“We actually had a positive bottom line profit when we launched the Mach-E, commodity costs have wiped that out,” Chief Financial Officer John Lawler said Wednesday at the Deutsche Bank Global Automotive Conference, referring to 2020, when the vehicle went on sale. “You’re going to see pressure on the bottom line when we launch our EVs, they’re not going to be positive.”

 

link: https://finance.yahoo.com/news/ford-mustang-mach-e-profit-170117652.html

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2 hours ago, bzcat said:

Breaking new: Things cost more, inflation happening. 🙃

 

What Lawler is saying is that Ford is going to raise prices, probably soon.

 

Ford has already increased prices more than once for Mustang Mach-E since its introduction. With demand for that vehicle far outpacing supply, multiple additional price hikes in calendar year 2022 are a foregone conclusion.

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Look at the price increases with Tesla over the past year; Lithium prices have skyrocketed. There are going to be some substantial price increases coming for 2023MY.

Maverick is the same way the base hybrid is now losing money.

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22 minutes ago, jasonj80 said:

Look at the price increases with Tesla over the past year; Lithium prices have skyrocketed. There are going to be some substantial price increases coming for 2023MY.

Maverick is the same way the base hybrid is now losing money.

 

Just expect price increases on the 2023 models and incremental increases until thing start to settle down (if that happens).

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“The company also has boosted prices on the Mach-E this year, he said, without giving specifics. But the model, which Ford is recalling for a defect that could cause it to stop running, now costs $25,000 more to produce than an equivalent gas-powered Edge SUV, he said.“

 

wow.  25k buys a lot of gas.  My understanding of what Lawler said was it was now unprofitable and there would be pressure on future EVs also.  Lightning production may not ramp up very quickly if it can’t be sold at a reasonable profit.  Low supply could keep prices high enough to be profitable.

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Posted (edited)
11 hours ago, slemke said:

“The company also has boosted prices on the Mach-E this year, he said, without giving specifics. But the model, which Ford is recalling for a defect that could cause it to stop running, now costs $25,000 more to produce than an equivalent gas-powered Edge SUV, he said.“

 

wow.  25k buys a lot of gas.  My understanding of what Lawler said was it was now unprofitable and there would be pressure on future EVs also.  Lightning production may not ramp up very quickly if it can’t be sold at a reasonable profit.  Low supply could keep prices high enough to be profitable.

OK quick math before we lose that cost line, if Mach E entry price is ~$44,000 and is break even, then that would be the approximate build cost…kinda sorta….so take $25,000 off that and a base Edge build cost would be ~$19,000……..kinda sorta. Maybe based on a more popular mid trim level price point?

 

Sometimes, Ford inadvertently tips it hand on things we mere mortals are never supposed to know….

Edited by jpd80

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2 hours ago, jpd80 said:

Sometimes, Ford inadvertently tips it hand on things we mere mortals are never supposed to know….

 

Yes indeed jpd80. Lawler's comments do confirm what some on this forum have shared in other threads, that Ford must apply a totally different approach to the entire business in order to build BEV profitably. Fortunately the Ford+ plan splitting the company into Model e and Blue divisions is a step in the right direction as Ford transitions to a 100% electric vehicle lineup.

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9 hours ago, rperez817 said:

 

Yes indeed jpd80. Lawler's comments do confirm what some on this forum have shared in other threads, that Ford must apply a totally different approach to the entire business in order to build BEV profitably. Fortunately the Ford+ plan splitting the company into Model e and Blue divisions is a step in the right direction as Ford transitions to a 100% electric vehicle lineup.

What approach might that be and why couldn’t it be applied to ice vehicles also?  Weren’t you one of the folks convinced Ford needed to get into BEVs since they would be more profitable?  Seems to me that people are only willing to spend so much on a vehicle whether electric or conventional and the cost of batteries is still too high to compete in the volume consumer market.  The premium market is a different story.  The battery cost can be hidden easier as those vehicles had higher margins and premium powertrains.
 

Ford has some work to do on making everything more efficiently without cost cutting the consumer notices.  If not, Ford will be one of the companies facing consolidation.

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9 hours ago, rperez817 said:

 

Yes indeed jpd80. Lawler's comments do confirm what some on this forum have shared in other threads, that Ford must apply a totally different approach to the entire business in order to build BEV profitably. Fortunately the Ford+ plan splitting the company into Model e and Blue divisions is a step in the right direction as Ford transitions to a 100% electric vehicle lineup.

I just noticed something,

Last year Tesla shared that it’s COGS, cost of producing the Tesla 3 & Y was $36,000 and the average sale price around $45,000 but announced a $9,000 price increase for US Tesla Y in November 2021, so their US  cost is probably $45,000…..similar to Mach E.

 

Ford has to match Tesla Y pricing or Mach E remains an expensive waste of time…….Makes me wonder how rising commodity prices are affecting Lightning’s profitability, no doubt masked by that first year rich build mix.

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Posted (edited)
43 minutes ago, slemke said:

What approach might that be and why couldn’t it be applied to ice vehicles also?  Weren’t you one of the folks convinced Ford needed to get into BEVs since they would be more profitable?  Seems to me that people are only willing to spend so much on a vehicle whether electric or conventional and the cost of batteries is still too high to compete in the volume consumer market.  The premium market is a different story.  The battery cost can be hidden easier as those vehicles had higher margins and premium powertrains.
 

Ford has some work to do on making everything more efficiently without cost cutting the consumer notices.  If not, Ford will be one of the companies facing consolidation.

Good point,

I’m suspecting that separating Model E from Ford Blue is all about creative accountancy like we saw with New GM and Old GM, all the good stuff like profits will go to Model E and all the losses will be racked up on Ford Blue and hey presto, BEVs are profitable and ICE are all loss makers….

 

This is Ford lying to itself so that it can lie to stockholders and Wall Street about the real condition of its business…it’s spending a fortune on BEVs that will take decades to repay without the help of its ICEs, the inconvenient truth is that Ford will throw $50 billion debt on Ford Blue and eventually send it bankrupt just like Old GM.

Edited by jpd80

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1 hour ago, jpd80 said:

Good point,

I’m suspecting that separating Model E from Ford Blue is all about creative accountancy like we saw with New GM and Old GM, all the good stuff like profits will go to Model E and all the losses will be racked up on Ford Blue and hey presto, BEVs are profitable and ICE are all loss makers….

 

This is Ford lying to itself so that it can lie to stockholders and Wall Street about the real condition of its business…it’s spending a fortune on BEVs that will take decades to repay without the help of its ICEs, the inconvenient truth is that Ford will throw $50 billion debt on Ford Blue and eventually send it bankrupt just like Old GM.


I don’t believe that.  Farley even said Blue will be the cash cow that funds BEV development.  Blue will be managing costs and maximizing profit while EV gets the new investment and focuses on product development.

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Posted (edited)
50 minutes ago, akirby said:


I don’t believe that.  Farley even said Blue will be the cash cow that funds BEV development.  Blue will be managing costs and maximizing profit while EV gets the new investment and focuses on product development.

Ford Blue serves a purpose, the cash cow that pays for everything until the day it no longer does……

 

Maybe Im too cynical but there’s a great opportunity for Ford to Run Ford Blue into the ground by sending profits

to Model E and allocating all debts to Ford Blue kind of the way GM did during its restructure. Following that plan,

its easy to see how Ford will never have to pay off that $50 billion debt if it sends Ford Blue and it’s future assets to CH 7 to be voluntarily wound up in let’s say, eight to ten years time…….

Edited by jpd80

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Posted (edited)

Regarding Mach E price rises, has already happened on export model in Britain back in April, maybe similar for North America.

 

 

Quote

https://insideevs.com/news/580393/mach-e-price-rise/

Apr 17, 2022 at 11:16am ET

22

By: Ben O'Hare

Ford Mustang Mach-E prices have risen significantly in the UK due to increased material and energy costs. The Mach-E originally started at £41,330 ($53,976) in Britain, however if you want to order an entry-level Standard Range RWD Mach-E you'll now have to pay at least £47,530 ($62,074).

 

The £6,200 ($8,097) price hike is due in part to the war in Ukraine, which has resulted in a scarcity of certain raw materials.

 

The Extended Range RWD Mach-E has increased from £49,980 ($65,273) to £52,080 ($68,016).

 

Meanwhile, the Standard Range AWD now retails for £54,100 ($70,654), originally being £46,650 ($60,924).

 

The Extended Range AWD will now set you back at least £61,480 ($80,292), up from £57,030 ($74,481).

 

The performance-oriented Mach-E GT had the smallest price rise, going from £67,225 ($87,795) to £68,030 ($88,847). 

 

The changes came into effect on April 1. Despite the price hikes, Ford told UK outlet AutoCar that demand for the Mach-E remains strong. Ford also mentioned steel and rising energy prices as key contributors to their decision to raise prices.

 

As for the US, no changes have been made for now. However, the Mach-E appears to be sold out for the 2022 model year in America.

 

Ford's US site states the following: 

"Due to high demand, the current model year is no longer available for retail order. Limited inventory may be available at selected dealers. Contact your dealer for more information."

 

 

 

Edited by jpd80

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13 hours ago, slemke said:

Seems to me that people are only willing to spend so much on a vehicle whether electric or conventional and the cost of batteries is still too high to compete in the volume consumer market.

It’s most likely because they don’t have more money to spend considering how significant the cost increases have been on vehicles over the last few years and how expensive everything else has gotten.  

 

11 hours ago, jpd80 said:

Ford Blue serves a purpose, the cash cow that pays for everything until the day it no longer does……

This is what what has been worrying me about many of Ford’s headlines recently.  Regardless  what people think, the electric transition isn’t going to happen overnight, and I hope Ford doesn’t neglect their ice vehicles during this period to the point they aren’t competitive anymore, thus diminishing Ford’s profitability to manage this transition. 

I have nothing against electric vehicles, but for now I I’m not interested in buying one for a number of reasons.  I hope Ford continues to innovate on its ice vehicles until I’m ready to make that jump.   Although I like Farley, a number of things have happened under his watch and some things he has said recently worry me that won’t happen. I think this  transition period will be pretty treacherous for Ford while they are trying to build for the future and maintain loyal customers that have put them in a position to do so. 

 

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11 hours ago, jpd80 said:

Ford Blue serves a purpose, the cash cow that pays for everything until the day it no longer does……

 

Maybe Im too cynical but there’s a great opportunity for Ford to Run Ford Blue into the ground by sending profits

to Model E and allocating all debts to Ford Blue kind of the way GM did during its restructure. Following that plan,

its easy to see how Ford will never have to pay off that $50 billion debt if it sends Ford Blue and it’s future assets to CH 7 to be voluntarily wound up in let’s say, eight to ten years time…….


A business unit can’t file bankruptcy.  Drastic changes in profits or costs will be easily spotted.  To the contrary, putting the EV startup costs on a separate ledger (new factories, EV platform and technology development) will prevent Blue profits from being artificially diluted.

 

Lets say the company broke even, but Blue actually made $10B on ICE vehicles and that $10B went towards new EV production capacity for the future.  That’s a huge win/win and far better than Ford made no profit.  As long as they’re showing progress and investment in the future they don’t need big EV profits,  Those will come after the initial investments.

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12 hours ago, akirby said:


I don’t believe that.  Farley even said Blue will be the cash cow that funds BEV development.  Blue will be managing costs and maximizing profit while EV gets the new investment and focuses on product development.

 

12 hours ago, jpd80 said:

Ford Blue serves a purpose, the cash cow that pays for everything until the day it no longer does……

 

Maybe Im too cynical but there’s a great opportunity for Ford to Run Ford Blue into the ground by sending profits

to Model E and allocating all debts to Ford Blue kind of the way GM did during its restructure. Following that plan,

its easy to see how Ford will never have to pay off that $50 billion debt if it sends Ford Blue and it’s future assets to CH 7 to be voluntarily wound up in let’s say, eight to ten years time…….


😒 ugh, I wish it was easier to transfer plants. 

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57 minutes ago, tbone said:


I have nothing against electric vehicles, but for now I I’m not interested in buying one for a number of reasons.  I hope Ford continues to innovate on its ice vehicles until I’m ready to make that jump.   Although I like Farley, a number of things have happened under his watch and some things he has said recently worry me that won’t happen. I think this  transition period will be pretty treacherous for Ford while they are trying to build for the future and maintain loyal customers that have put them in a position to do so. 

 


Farley is very smart.  He knows ICE will be around for a good while and he also knows the seed investment required for the EV transition will limit profitability short term and he knows that Blue will have to fund that.  Supply chain has shown Ford a new way of operating to increase profitability.

 

What will change is the lower profit margin vehicles will be sacrificed and those resources moved to the EV side over time.  Trucks, vans, Expy, Explorer, Bronco family, Mustang are pretty safe.  Escape hybrid is probably safe.   The question is how much cost cutting will they do on what remains.  There are many ways to cut costs without decontenting, especially if you’re trying to keep MSRP ATPs.

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34 minutes ago, fuzzymoomoo said:

 


😒 ugh, I wish it was easier to transfer plants. 


I’d say Bronco and Ranger are as safe as you can get for the next decade at least.

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Posted (edited)
1 hour ago, akirby said:


I’d say Bronco and Ranger are as safe as you can get for the next decade at least.


I would love to agree with you but a Bronco is a toy, just like a Wrangler. If this coming recession is as bad as some experts think, what do you think is going to be the first thing most people stop spending money on? 

Edited by fuzzymoomoo

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13 hours ago, jpd80 said:

Maybe Im too cynical but there’s a great opportunity for Ford to Run Ford Blue into the ground by sending profits

to Model E and allocating all debts to Ford Blue kind of the way GM did during its restructure. Following that plan,

its easy to see how Ford will never have to pay off that $50 billion debt if it sends Ford Blue and it’s future assets to CH 7 to be voluntarily wound up in let’s say, eight to ten years time…….

 

Good points jpd80, as always your posts are very logical and thoughtful (not cynical at all). When the Ford+ business plan to split Ford into Model e and Blue divisions was announced in March, several automotive industry analysts mentioned that the split positions Ford well for future spin offs.

 

Given that Ford Blue is a legacy business that's in terminal decline, Ford may sell whatever remains to private equity or hedge fund firms by the end of the decade. But the scenario you mentioned involving Chapter 7 bankruptcy is also a distinct possibility. Ford can be creative with financial accounting as it restructures both Model e and Blue divisions over the next few years.

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4 hours ago, akirby said:


Farley is very smart.  He knows ICE will be around for a good while and he also knows the seed investment required for the EV transition will limit profitability short term and he knows that Blue will have to fund that.  Supply chain has shown Ford a new way of operating to increase profitability.

 

What will change is the lower profit margin vehicles will be sacrificed and those resources moved to the EV side over time.  Trucks, vans, Expy, Explorer, Bronco family, Mustang are pretty safe.  Escape hybrid is probably safe.   The question is how much cost cutting will they do on what remains.  There are many ways to cut costs without decontenting, especially if you’re trying to keep MSRP ATPs.

That’s the big question…how will Ford cut costs.  If part of it is restricted development dollars, the vehicles could quickly become uncompetitive and profits will suffer.  It is a delicate balancing act and Ford doesn’t have a good history of pulling it off.  The Jac Nasser/Bill Ford/Mark Fields trio of the late 90’s early 2000’s comes to mind.  Just spend enough on product development to not be dead last and hope customers still want to buy your product.  But, they didn’t.  Customers went elsewhere or held off purchases until the product development ramped back up to deliver compelling products.  Maybe like Jpd, I’m too cynical about it.  Place your bets and we’ll see in a decade.

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2 hours ago, rperez817 said:

 

Good points jpd80, as always your posts are very logical and thoughtful (not cynical at all). When the Ford+ business plan to split Ford into Model e and Blue divisions was announced in March, several automotive industry analysts mentioned that the split positions Ford well for future spin offs.

 

Given that Ford Blue is a legacy business that's in terminal decline, Ford may sell whatever remains to private equity or hedge fund firms by the end of the decade. But the scenario you mentioned involving Chapter 7 bankruptcy is also a distinct possibility. Ford can be creative with financial accounting as it restructures both Model e and Blue divisions over the next few years.

Too early to put the nails in the Ford Blue coffin, but the writing seems to be on the wall for it with government mandates.  Never know what happens.  But I too see it spun off saddled with insurmountable debt from the EV transition that this separate entity is then forced into bankruptcy leaving Ford and the model E without legacy baggage or startup costs.

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Posted (edited)
7 hours ago, akirby said:


A business unit can’t file bankruptcy.  Drastic changes in profits or costs will be easily spotted.  To the contrary, putting the EV startup costs on a separate ledger (new factories, EV platform and technology development) will prevent Blue profits from being artificially diluted.

OK, I’m play devils advocate here to explore a possibility…

 

What if Ford Blue was made into a completely  separate company?

Still earning profit but loaded down with all the debt while  all the good assets and cash on hand kept with Mach E

That doesn’t mean it would go bankrupt tomorrow but maybe at it natural conclusion in say ten years or so?

In the mean time, Model E could have an alliance arrangement with Ford Blue to continue existing arrangements but Ford Blue behaving like a supplier to Model E

 

 

Quote

Lets say the company broke even, but Blue actually made $10B on ICE vehicles and that $10B went towards new EV production capacity for the future.  That’s a huge win/win and far better than Ford made no profit.  As long as they’re showing progress and investment in the future they don’t need big EV profits,  Those will come after the initial investments.

Again, just exploring an alternate possibility….
 

Yes, Ford is planning to do exactly what you said but, how long is it going to take some bright spark accountant to work out a way of arranging those assets and BUs in a way where the continuing BU will never be required to pay off that $50 billion.

 

I’m looking at the GM BK as a way for Ford to do a complete split so that all debts and unwanted assets could be left behind, I was shocked that GM was allowed to do that and still keep all of its cash and assets and discard massive debts and unwanted assets……so what’s stopping Ford doing similar in future while the EVs make very little cash?

Edited by jpd80

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20 hours ago, jpd80 said:

Ford Blue serves a purpose, the cash cow that pays for everything until the day it no longer does……

 

Maybe Im too cynical but there’s a great opportunity for Ford to Run Ford Blue into the ground by sending profits

to Model E and allocating all debts to Ford Blue kind of the way GM did during its restructure. Following that plan,

its easy to see how Ford will never have to pay off that $50 billion debt if it sends Ford Blue and it’s future assets to CH 7 to be voluntarily wound up in let’s say, eight to ten years time…….

Ford could not send a division onto bankruptcy.  Model E and Ford Bluexwould have to be separate companies to do that- much like gm did with Delphi. 

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