All profits are not created equally for Ford, Tesla
The stock market may be tanking, but two American automakers battling their own separate demons are making real money — and getting decidedly different reactions on Wall Street.
In an announcement hastily pulled ahead by two weeks, California-based Tesla Inc. late Wednesday confirmed a rare quarterly profit of nearly $312 million on revenue of $6.8 billion. The news, coming amid a punishing sell-off across equity markets, drove Tesla shares nearly 30 percent higher in after-hours trading.
Ford Motor Co., in the early stages of what's expected to be a years-long restructuring, said third-quarter net income slid 37 percent to nearly $1 billion, reported nearly 9 percent pre-tax margins in North America and confirmed its cash hoard swelled to $23.7 billion. It beat consensus expectations, but Ford shares rose less than 4 percent after-hours.
The contrast couldn't be more stark — and representative of what amounts to two auto industries competing for investor respect: a Silicon Valley start-up with dodgy vehicle quality, a mercurial CEO and well-established record of capital incineration gets major props for finally posting a profitable quarter.
And a legacy automaker 100 years its senior, producer of tens of billions in profits since 2010 and America's best-selling vehicle for more than 40 years is greeted with demands for more: more detail about its restructuring, about how much it's saved so far, about how many salaried jobs it's likely to cut next year, about how it will fix China, about how deeply it will cut back operations in Europe and South America.
"These two automakers could not be more divergent from one another," said Jeremy Acevedo, analyst with Edmunds. "What's most apparent is the difference in standards that these companies are held up to. Both Ford and Tesla reported profitability in Q3, but Ford's feet are being held to the fire while Tesla's stocks are likely going to soar."
The "Model 3 might be the story of Q3," he added, referring to the launch of Tesla's highly anticipated compact electric car. But "it's easy to forget that Ford is still a sales titan and produces the perennially best-selling vehicle in the United States."
And that it's on comparatively solid financial footing. Even as Ford's CFO touted rising margins in North America and a swollen cash balance, Tesla CEO Elon Musk told investors its is the company's "aspiration" to have positive cash flow in "all quarters going forward."
The difference is the future — an "advantage" Musk said he gives Tesla. Despite its operational woes and Musk's erratic behavior, investors still are betting more on Tesla to pave the way to an electric, autonomous future than a 115-year-old automaker whose founder is credited with innovating the moving assembly line and helping to create the American middle class.
Ford boosted its North American profit margin, which was below 8 percent in the second quarter, to nearly 9 percent in the third quarter. But analysts on Wednesday peppered CEO Jim Hackett and Chief Financial Officer Bob Shanks for details on the continuing "redesign" of the business.
The investment community still wanted to know how Ford — which has booked $3.8 billion in profit so far this year and boasts a record of building the trucks and SUVs U.S. buyers want — would make itself a company fit for the future.
To be clear, Ford continues to make money, chiefly on the strength of its F-Series pickups, its SUVs and its commercial trucks, the backbone of its controversial strategy to move away from cars and into higher-margin vehicles. And the third quarter helped drive home the point: its product mix improved by $1 billion as sales shifted more toward trucks, SUVs and richer trim levels.
Yet its troubles outside the United States are continuing. Ford lost $378 million in China, the automaker's No. 2 market worldwide. It lost $245 million in Europe, $152 million in South America and $208 million in the Asia Pacific region. Only the Middle East and Africa unit reported a profit outside the United States, a total of $47 million profit.
"It’s not that we don’t know where we’re going or how to do it," Hackett told analysts, asking for more time to execute an $11 billion global restructuring. "It’s that it’s a massive undertaking. It is happening. North America is where I’m seeing early benefits."
He added: "We’re moving with urgency to execute against this strategy. We look forward to sharing more about this global redesign of the company. We’re going to come to you more frequently."