Ford's Quarterly Profit Plummets 26% Due to $1 Billion Write-Off for Canceled Electric SUV Project

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Ford's quarterly profit dropped by nearly 26% due to a significant $1 billion write-off related to the cancellation of an electric SUV project. The key reasons for this write-off and the subsequent financial impact are as follows:

Reasons for the $1 Billion Write-Off

High Battery Costs: One of the primary reasons for the cancellation of the electric SUV project was the high cost associated with large batteries. The company found that the expenses for developing and producing these batteries were not economically viable.

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Changing Legislation: The volatility in legislative changes also played a role. For instance, the UK's decision to bring forward the ban on internal combustion engines to 2030 added pressure on Ford to adapt quickly to new regulations, which might have influenced the decision to cancel the project.

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Strategic Shift: Ford has decided to prioritize the development of new hybrid three-row SUVs, reducing its annual spend on electric vehicles from 40% of its total investment. This strategic shift indicates a reevaluation of their investment priorities in response to market conditions and internal financial assessments.

Financial Performance Impact

Profit Decline: The $1 billion write-off significantly impacted Ford's net profit, causing it to fall by nearly 26%. This write-off was recorded as an accounting charge to write down assets related to the canceled electric SUV project.
EBIT and Revenue: Despite the write-off, Ford Pro, which focuses on commercial vehicles and services, generated $1.8 billion in EBIT with a margin of 11.6% on revenue of $15.7 billion, marking a 13% increase from the previous period.
Stock Performance: The weak financial outlook and the significant write-off led to a decline in Ford's stock value. The market reacted negatively to the news, reflecting concerns about the company's profitability and strategic direction.

In summary, Ford's quarterly profit drop was primarily due to the $1 billion write-off related to the cancellation of an electric SUV project, driven by high battery costs, changing legislation, and a strategic shift towards hybrid vehicles. This financial hit was substantial, affecting both the company's profitability and stock performance.

Ford's Quarterly Profit Plummets 26% Due to $1 Billion Write-Off for Canceled Electric SUV Project

Preview

Reasons for the $1 Billion Write-Off

High Battery Costs: One of the primary reasons for the cancellation of the electric SUV project was the high cost associated with large batteries. The company found that the expenses for developing and producing these batteries were not economically viable.

Preview

Changing Legislation: The volatility in legislative changes also played a role. For instance, the UK's decision to bring forward the ban on internal combustion engines to 2030 added pressure on Ford to adapt quickly to new regulations, which might have influenced the decision to cancel the project.

Preview

Strategic Shift: Ford has decided to prioritize the development of new hybrid three-row SUVs, reducing its annual spend on electric vehicles from 40% of its total investment. This strategic shift indicates a reevaluation of their investment priorities in response to market conditions and internal financial assessments.

Financial Performance Impact

Profit Decline: The $1 billion write-off significantly impacted Ford's net profit, causing it to fall by nearly 26%. This write-off was recorded as an accounting charge to write down assets related to the canceled electric SUV project.
EBIT and Revenue: Despite the write-off, Ford Pro, which focuses on commercial vehicles and services, generated $1.8 billion in EBIT with a margin of 11.6% on revenue of $15.7 billion, marking a 13% increase from the previous period.
Stock Performance: The weak financial outlook and the significant write-off led to a decline in Ford's stock value. The market reacted negatively to the news, reflecting concerns about the company's profitability and strategic direction.