Why Ford Pulled Its Profit Guidance Despite The Tentative Labor Deal

Due to the labor stoppage, it is understandable why Ford (F) reported mixed third-quarter earnings. But it doesn't explain why the Dearborn, Michigan-based automaker joined GM in pulling its full-year guidance, even after reaching a tentative labor contract deal with the United Auto Workers (UAW). Something even bigger does. 

After-hours trading caused a price drop in Ford shares following the release of the third-quarter results.  The company's top-line revenue of $43.8 billion beat the estimated $41.21 by 11%. However, it substantially dropped from the $45.0 billion Q2 top-line earnings. The difference equates to a decrease in the adjusted earnings per share of $0.47 to $0.39.

Ford reported the company had earned $9.4 billion in adjusted earnings for interest and taxes (EBIT) toward its full-year target of $11 billion to $12 billion.  However, Ford claims the UAW strike and the ratification of the tentative agreement with the UAW is why the company is withdrawing its guidance for full-year 2023 operating results. 

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The Q3 Report

Even more interesting, Q3 represents the third time Ford reported performance across its three primary business lines: Ford Pro for its commercial and Super Duty trucks business, Ford Blue for gas-powered cars, and Ford Model e for its EV business. The results are as follows.

Ford Pro

• Revenue: $13.8 Billion vs. $14.65 billion estimate
• EBIT: $1.65 billion vs. $2.16 billion estimate

Ford Blue

• Revenue: $25.6 billion vs. $23.93 billion estimate
• EBIT: $1.72 billion vs. $194 billion estimate

Ford Model e

Revenue: $1.8 billion vs. $2.34 billion estimate

EBIT loss: $1.33 billion vs. $1.27 billion estimate

Since it is supposed to be the flagship for the future, the Model e EV business of $1.33 billion stands out as an indicator of extended troubles in that area.  Ford attributes the loss to its investment in next-gen vehicles. According to a company statement, "Many North American customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles, sharply compressing EV prices and profitability."

As a result, Ford CFO John Lawler is hesitant to publicly commit to a steady course forward for its upcoming Blue Oval City EV and battery plant, especially since Ford projected a $4.5 billion loss for the unit in the last quarter of 2023. Although EV sales were up 14.8% in the third quality, Ford will be looking hard at its EV cost price dilemma. This challenge may be difficult to overcome since it's apparent they have hit a price ceiling on these units.

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Why the New SEC Chairman Scares Crypto Investors So Much ?

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 7/3/21

Who's Afraid of Gary Gensler?

Bitcoin's (BTC-USD) price took a dip yesterday as investors recoiled from the mere suggestion of tighter regulations on the cryptocurrency space. The price dip occurred after the newly appointed US Securities and Exchange Commission Chairman, Gary Gensler, expressed the need for more regulation in the cryptocurrency market. 

Since his job is to protect the investor, Gensler's comments should not have surprised anyone. He would target the most speculative investing space today. However, this statement of the obvious sent Bitcoin down 3.8% this morning, nullifying the weekend rally. Ethereum (ETH-USD), Dogecoin (DOGE-USD), and XRP (XRP-USD) had similar price drops.

What's the Big Deal?

Why would many crypto-investors view Gary Gensler as a boogeyman? The answer centers around the core purpose of the cryptocurrency founders: to create a decentralized currency system free of regulatory constraints.  In this context, the SEC represents the cops who come to your house to break up a really rocking pool party. 

Cryptocurrency exchanges have evolved to the point where institutional investors have joined the party. This growing acceptance by big commerce can appear like a double-edged sword — one side can be a catalyst for change, and the other side can cause harm to investors. So, the inevitability of regulator controls is here. The crackdown is already happening around the world. Crypto exchanges such as Binance and Defi have started to comply with new limits on leverage and withdrawals. 

Why Gary's Not So Scary

If crypto investors and exchanges had to choose the top Bitcoin cop, Gary Gensler would be an excellent choice because he is a cryptocurrency expert. In fact, he once taught a class on blockchain technology at the Massachusetts Institute of Technology (MIT). In a recent Bloomberg article, he revealed a method for approving an exchange-traded fund that tracks Bitcoin futures. A crypto ETF would provide a major inroad for cryptocurrency to go mainstream, and Gensler believes it would provide sufficient protection for investors. Since the possibility of Bitcoin ETFs has historically faced SEC resistance, this type of overture from the new SEC chairman should signal to investors that future regulations may be more nuanced than traditional restrictions.  

The Eventual Crypto Outcome

From my decades of following the ebbs and flows of the market, I've seen investors almost always recoil at the slightest sign of negativity before considering all the other factors. We know that cryptocurrency is as much a disruptor to commerce as the internet was to business and society. Still, the thought of governments putting momentum-killing constraints on crypto can cause anxiety. However, like the internet, all parties involved in this space have a vested interest in allowing cryptocurrency to reach its potential. It has the potential to function with emerging technologies like no other medium of exchange. 

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