Ford again warns on EV results, withdraws 2023 forecast


(Reuters) - Ford Motor (F.N) on Thursday withdrew its full-year results forecast due to "uncertainty" over the pending ratification of its deal with the United Auto Workers (UAW) union, and warned of continued pressure on electric vehicles, sending shares of the company down more than 4% after-hours.

The union and Ford on Wednesday reached a tentative agreement that included a 25% wage hike for 57,000 workers over 4 1/2 years, ending a strike at some of the automaker's biggest factories.

Ford expects the new contract will add $850 to $900 in labor cost per vehicle, Chief Financial Officer John Lawler said in a briefing on Thursday.

The concessions made by the company are significant, said CFRA research analyst Garrett Nelson in an investor note on Thursday. "They will weigh on margins and affect its competitiveness relative to Tesla and other non-union automakers."

Ford's increasing concern about cooling EV demand follows a decision by rival General Motors (GM.N) earlier this week to postpone a $4 billion electric truck plant in Michigan.

Lawler reiterated that Ford will delay some of its planned multibillion-dollar investment in new EV and battery production capacity, citing "tremendous downward pressure" on prices.

Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the quarter - even more than its estimated $32,350 loss per EV in the second quarter.

During Ford's second-quarter earnings briefing in July, Chief Executive Officer Jim Farley said the company would slow the ramp-up of money-losing EVs, shifting investment to Ford's commercial vehicle unit and citing plans to quadruple sales of gas-electric hybrids over the next five years.

Like many of its competitors, Ford is "trying to find the balance between price, margin and EV demand," Lawler said on Thursday. For consumers, Farley added, "affordability is an issue."

GM also withdrew its 2023 results forecast earlier this week and walked back its often-repeated expectation of building 400,000 EVs by mid-2024.

Ford's adjusted third-quarter earnings per share of 39 cents missed the Wall Street average target of 45 cents, according to LSEG data.

Revenue excluding Ford Credit of $41.18 billion was slightly shy of Wall Street forecasts of $41.22 billion, according to LSEG data.

Ford said its EV unit posted a loss in earnings before interest and taxes of $1.3 billion, bringing its nine-month EBIT loss to $3.1 billion. The company had forecast a full-year pretax loss of $4.5 billion for the Ford Model E unit.

The automaker said its EV business was experiencing "sharply compressed" prices and profitability, and said customers were not willing to pay a premium for EVs over comparable combustion and hybrid models.

Ford's third-quarter profit of $1.2 billion compared with a year-earlier loss of $827 million. Last year's loss included a $2.7 billion noncash writedown on Ford's investment in the now-shuttered Argo automated vehicle business.

The automaker said its Ford Pro commercial vehicle business and Ford Blue combustion and hybrid vehicle business both posted higher year-on-year revenue, EBIT, and EBIT margins. Vehicle sales to dealers in both units were lower than a year ago.

Adjusted free cash flow fell to $1.2 billion, from $3.6 billion a year earlier.

General Motors (GM.N) driverless car unit Cruise said late Thursday it will suspend all operations nationwide after California regulators this week ordered the robotaxi operator to remove its driverless cars from state roads.

California's Department of Motor Vehicles (DMV) on Tuesday said Cruise driverless vehicles were a risk to the public and that the company had "misrepresented" the technology's safety.

Cruise said "The most important thing for us right now is to take steps to rebuild public trust... In that spirit, we have decided to proactively pause driverless operations across all of our fleets while we take time to examine our processes, systems, and tools."

Cruise has driverless operations in Phoenix, Houston, Austin, Dallas and Miami.

The suspension, following a series of accidents involving Cruise vehicles, is a significant setback to the self-driving business that GM has called a major growth opportunity.

Cruise said Thursday the decision is unrelated to any new on-road incidents and supervised autonomous vehicle operations will continue.

The DMV on Tuesday said Cruise driverless vehicles "are not safe for the public's operation," citing "an unreasonable risk to public safety."

Earlier Thursday, U.S. auto safety officials said they were investigating five additional reports of Cruise self-driving cars engaging in inappropriately hard braking that resulted in collisions.

The National Highway Traffic Safety Administration (NHTSA) said in December it had opened a formal safety probe into Cruise after reports of three crashes in which its vehicles were struck from behind by other vehicles after the autonomous vehicles braked quickly, resulting in two injuries.

In an Oct. 20 letter made public Thursday, however, NHTSA said it was asking questions about five new crash reports involving Cruise vehicles that braked with no obstacles ahead and is seeking additional information by Nov. 3.

"Inappropriately hard braking results in the Cruise vehicles becoming unexpected roadway obstacles and may result in a collision with a Cruise vehicle," NHTSA said in its letter.

Cruise said it was cooperating with the ongoing investigation.

"We welcome NHTSA's questions related to our safety record and operations," Cruise said.

NHTSA earlier this month opened a separate probe into whether Cruise was taking sufficient precautions with autonomous robotaxis to safeguard pedestrians.

In August, the DMV directed Cruise to remove half of its driverless vehicles after another crash.

Cruise said the DMV was reviewing an Oct. 2 incident where one of its self-driving vehicles braked but did not avoid striking a pedestrian who had previously been struck by a hit-and-run driver.

The DMV order said Cruise had not initially disclosed all video footage of the accident and that "Cruise's vehicles may lack the ability to respond in a safe and appropriate manner during incidents involving a pedestrian."

Cruise denied the allegation saying it had shown the DMV "the complete video multiple times." (AMZN.O) on Thursday said growth in its cloud business is stabilizing as it signed new deals, but warned that consumers remained wary about spending going into the holiday quarter.

The company predicted a rise in revenue over the key holiday season that could still miss Wall Street expectations, as it reported strong third-quarter results buoyed by a recent marketing blitz and faster delivery.

Shares in the company ricocheted after hours, rising, falling, and ultimately rising 5%.

Facing an array of challenges to its business, Amazon is trying to keep its mantle as the world's biggest cloud provider and online retailer.

The company has sought to bolster its cloud, answering rivals Google (GOOGL.O) and Microsoft (MSFT.O) with a deal to invest up to $4 billion in chatbot maker Anthropic and touting an AI service drawing thousands of users.

Amazon likewise has reorganized its delivery network to locate goods closer to shoppers, letting it fulfill orders faster than before, and more cheaply.

At the same time, it has faced an array of challenges, among them tight household budgets, businesses scrutinizing their cloud spending, and a September lawsuit by the U.S. Federal Trade Commission, which accuses Amazon of inflating prices and wielding monopoly power. The company is contesting the claims.

Against this backdrop, the company forecast revenue in the range of $160 billion and $167 billion for the all-important holiday quarter ending Dec. 31. Analysts polled by LSEG were expecting sales of $166.62 billion, at the higher end of Amazon's guidance.

Reuters Graphics
Reuters Graphics

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said Amazon's ramp-up in seasonal hires boded well for consumer discretionary spending, to a point.

"We could be looking at a final spending push before a substantial pullback in the new year. So, this is a risk that will need monitoring closely," she said.

Amazon's fortunes are often tied to those of its cloud-computing division. Long a major source of profit, Amazon Web Services (AWS) saw growth slow down in earlier quarters. Rival Microsoft, the second-largest cloud provider by revenue after Amazon, meanwhile beat Wall Street estimates this week as its customers geared up for AI upgrades.

On a call with reporters, Amazon's Chief Financial Officer Brian Olsavsky said efforts to help customers fine-tune how much they were spending in the cloud were "starting to slow down."

Amazon logo at the company's logistics center in Bretigny-sur-Orge

The logo of Amazon is seen at the company's logistics center in Bretigny-sur-Orge, near Paris, France, December 7, 2021. REUTERS/Gonzalo Fuentes/File Photo Acquire Licensing Rights

CEO Andy Jassy added in a call with analysts that AWS was picking up the pace of signing and closing deals, among them large expansions with existing customers as well as first-time agreements. He said in a statement: "Our AWS growth continued to stabilize."

The company also is piquing customers' interest through so-called generative AI, which, like the chatbot ChatGPT, can be prompted to conjure text, images, and other content with human-like ability. Jassy said he expected generative AI to lead to tens of billions of dollars in revenue for AWS over the next several years.

In total, AWS brought in revenue of $23.1 billion in the just-ended third quarter, compared with analysts' expectations of $23.09 billion.

Reuters Graphics
Reuters Graphics


Amazon's overall revenue in the third quarter rose 13% to $143.1 billion, beating Wall Street estimates of $141.41 billion, according to LSEG data. Net income rose to $9.9 billion in the third quarter from $2.87 billion a year earlier.

CFO Olsavsky said the company in general saw strong demand in sales categories such as beauty and health, although discretionary spending was lower.

"We still see customers remaining cautious about price, trading down where they can and seeking out deals," he said.

Abating inflation helped lower some of Amazon's transportation spending, somewhat offset by fuel costs, he said.

Several initiatives helped Amazon navigate the terrain. The company has said a third-quarter shopping blitz known as Prime Day notched its biggest sales day ever, while a follow-up promotion period was its largest October holiday kickoff to date.

Amazon's same-day delivery services have also helped its margins by spurring shoppers to place more frequent and bigger orders. The retailer invested heavily in recent years to make the service available in more places.

Sales in Amazon's North America segment increased 11% to nearly $88 billion in the third quarter, and the company reported a $4.3 billion operating profit in the business in that region compared with an operating loss a year earlier.

Amazon has cut costs aggressively since that loss. After planning 27,000 layoffs, or what had been 9% of its roughly 300,000-person staff starting last year, it has since revealed more role reductions, at Amazon Fresh stores, for instance.

Intel (INTC.O) forecast fourth-quarter revenue and margins above Wall Street estimates on Thursday, optimistic about a healthy rebound in personal computer sales, improvement in its data center business, and a growing lineup of customers seeking its manufacturing services.

While Intel remains under heavy competitive pressure from Nvidia (NVDA.O) in the data center chip market, the easing PC slump and stabilization of its server chip business helped raise gross margins faster than analysts had expected. The company's executives had warned that it could take well into next year for margins to rise significantly.

Shares of the Santa Clara, California-based company rose 8% after the closing bell.

The company also has secured three customers for its chip contract manufacturing business, with Chief Executive Pat Gelsinger telling Reuters he expects to close a deal for a fourth customer before year's end.

The decline in global PC shipments narrowed to 7% in the third quarter after double-digit percentage dips earlier this year, and the market is set to return to growth during the highly anticipated holiday season, analysts at research firm Canalys said.

The company forecast adjusted current-quarter revenue of about $14.6 billion to $15.6 billion, compared with an estimate of $14.35 billion according to LSEG data.

The company expects fourth-quarter adjusted profit per share of about 44 cents, above analysts' estimate of 32 cents.

Heavy manufacturing investments to support Gelsinger's turnaround plans have taken a toll on the company's gross margin, which shrank to the mid-30s in the second quarter from over 60% in 2020. The adjusted gross margin came to 45.8% in the third quarter, compared with estimates of 42.7% according to LSEG data.

Gelsinger said in an interview that Intel has a fourth foundry customer for its advanced manufacturing process called "18A," which it plans to start producing in late 2024 and which it will offer to customers through its Intel Foundry Services business.

"We now have three committed customers on 18A, and we expect that we will successfully conclude at least one more this quarter," Gelsinger said.

He declined to say how many chips Intel will manufacture for those companies, but said the first has pre-paid and is "a very significant customer."

"The next two are very meaningful, not as large as the first one," Gelsinger added in an interview. "But now we have engagements with essentially the who's who of foundry customers."

On a conference call with analysts, Gelsinger also said Intel is in talks with six new customers for its advanced packaging business.

"These wins are coups against TSMC," said Glenn O'Donnell, research director at Forrester, referring to Taiwan Semiconductor Manufacturing Co (2330. TW), the world's largest chipmaker.

Intel reported adjusted profits of 41 cents per share in the third quarter, compared to an estimate of 22 cents according to LSEG data. Revenue fell 8% to $14.2 billion.

Revenue in the client segment, which houses Intel's PC business, fell 3% to $7.9 billion. Asked about potential PC chip competition from Nvidia, which Reuters this week reported is planning to enter the market as soon as 2025, Gelsinger said on the conference call that "we don't see these as potentially being all that significant overall."

But he added that Arm-based chips for PCs could be "a great opportunity for our foundry" business.

Chief Financial Officer David Zinsner said Intel expects a fourth-quarter slowdown in sales of its programmable chips, as well as several quarters of slow sales next year. Intel said earlier this month it plans to spin that business off in an initial public offering.

Sales at its data center business, which also houses its AI chip division, dropped 10% to $3.8 billion. But Gelsinger said the company has seen interest surge for its "Gaudi" AI chips, with demand now outstripping supply.

Gelsinger said on a conference call that Intel's factories in Israel, which is embroiled in a war with Hamas after an attack earlier this month, are "not missing a single commitment" despite the conflict.

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