By Paul Lienert and Joseph White
DETROIT (Reuters) -Ford Motor Co on Wednesday reported a third-quarter net loss driven by its decision to shift spending from the Argo AI self-driving business.
Ford’s move, a sharp contrast with rival General Motors Co’s decision to double down on investments in its Cruise robotaxi unit, highlights the pressure on automakers to make hard choices as the financial demands of shifting to electric vehicles continue to rise.
Both U.S. automakers continue to post heavy losses on automated-vehicle development.
Ford posted a net loss in the quarter of $827 million, after taking a $2.7 billion noncash pretax impairment on its investment in Argo AI.
Ford shares were down 1.6% in after-hours trading.
The automaker said Argo will be “wound down” and that “talented engineers” will be offered positions with Ford.
The other key investor in Pittsburgh-based Argo, Volkswagen AG, said it, too, expects to hire some personnel from Argo.
In a statement on Wednesday, Argo said it “will not continue on its mission as a company,” a decision that was made “in coordination with our shareholders.” It said some Argo employees will be let go.
Ford and VW each hold around 39% of Argo, with Lyft Inc owning about 2% and the rest held by Argo’s founders and employees.
Chief Executive Jim Farley on Wednesday said Ford will shift its development focus away from fully self-driving systems developed by Argo to advanced driver assistance systems (ADAS) created internally at Ford. Such systems are partially automated but still require humans to stay engaged when a vehicle is moving.
“Profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” Farley said in a statement.
The U.S. automaker said third-quarter revenue jumped to $39.4 billion, up 10% from a year ago. Adjusted operating profit fell to $1.8 billion from $3.0 billion last year, but beat analysts’ consensus estimate of $1.7 billion.
Adjusted operating earnings per share of 30 cents beat analysts’ estimate of 27 cents.
Ford warned in mid-September that inflation-related supplier costs were running about $1 billion higher than expected.
GM on Tuesday reported a net profit of $3.3 billion on record third-quarter revenue of $41.9 billion. GM reaffirmed its guidance for full-year net income of $9.6 billion to $11.2 billion.
While GM executives were generally upbeat on the company’s earnings call, Ford was more cautious.
Ford Chief Financial Officer John Lawler, in a briefing Wednesday, said: “We see the probability that we could move into a mild (or) moderate recession in the U.S. next year. We could potentially have a more substantial decline in Europe.”
Ford said it expects full-year adjusted earnings before interest and taxes to rise to about $11.5 billion, up around 15% from a year ago, but at the low end of its previous guidance of $11.5 billion to $12.5 billion.
(Reporting by Joseph White and Paul Lienert in DetroitAdditional reporting by David Shepardson in WashingtonEditing by Ben Klayman and Matthew Lewis)
