Ford recently announced a $3.1 billion loss for their first quarter that they’re attributing to their investment in Rivian. Read to find out why.
Ford released their quarter one financial press release recently in which they stated that they’ve posted $34.5 billion in revenue. Ford goes on to mention the “undeniable” appeal of their new star vehicles, the Bronco, Bronco Sport, Maverick, Mustang Mach-E, E-Transit, and the aforementioned F-150 Lightning. The company also stated they intend to meet their production target of 600,000 EVs by the end of 2023, despite facing the current semiconductor shortage. However, it wasn’t all good news for Ford to kick off 2022 and they’re pointing the finger at Rivian.
It may be surprising to hear for some readers, but Ford has had a hand in helping Rivian for a little while now. Ford was one of the early backers of the startup after Rivian had started to make waves with the reveal of their R1T pickup and R1S SUV electric vehicle plans that were in the early stages of development. In April of 2019, Ford invested $500 million to create a partnership opportunity.
This investment was created to allow Ford to work with Rivian to jointly develop their plans for EVs using Rivian’s already established skateboard platform. The plans would eventually fall through, but some of their influence can be seen in Ford’s EV models the Mustang Mach-E, F-150 Lightning, and E-Transit. Rivian also gained some important industry resources and expertise from Ford, having been a staple auto manufacturer for over a hundred years. Ford kept its investment in place even though there wasn’t much movement in their joint efforts.
In November of 2021, Rivian went public at $78 per share and was able to raise $12 billion. Rivian’s stock price shot up 29% and peaked at $119.46 per share that day. It was being pictured as the next big automaker to take on the likes of Tesla in the EV space, so people were jumping at the chance to invest. This buying trend throughout the first week sent the company’s stock up to levels that surpassed other major automakers – even Ford.
Ford eventually made the announcement in later weeks that they were no longer pursuing a truck development alongside Rivian. This hurt Rivian’s stock, sending it down 17% within a day. Rivian tried to make up for some lost ground by announcing a new manufacturing plant in Georgia, but that was followed up by reports that the initial sales of the Rivian R1T did not meet their expectations.
Rivian ended 2021 on a low note after seeing such a successful first week on the stock exchange. The company’s shares had dropped 40% from the highest close. The company was still worth over $90 billion dollars at that time though, which still beat Ford’s value. However, Ford’s initial investment of $500 million ballooned to a $10.6 billion value even with the decline. The company reported a $9.1 billion gain for 2021.
So, here’s where Ford is blaming Rivian for their net loss of $3.1 billion for quarter one of 2022. Rivian has experienced a slide in the stock market with their shares having dropped 70% recently. This obviously doesn’t bode well for Ford’s investment, so the company announced that they had taken a charge of $5.4 billion attributed to its investment in Rivian. After adjusting earnings before interest and taxes (EBIT), the investment equated to $2.3 billion leading to the $3.1 billion net loss.
While Ford has been doing moderately well given the current chip shortages and other supply chain issues that are contributing to some production woes, it really is Rivian’s fault for their poor quarter one report. Rivian is also being met with the same problems as Ford, but their only production vehicle relies heavily on a lot of special components that aren’t easily available right now. Ford probably should have cashed out while the company’s stock was substantial or even before they broke the news about ending their joint effort on a new EV truck, but Rivian entered the market with a lot of promise and Ford must have some faith in the company since they backed them early on.
Ford’s CFO John Lawler wrapped up their quarter one financial report stating, “that a strong demand and pricing environment for existing and new vehicles support the company maintaining its full-year outlook for $11.5 billion to $12.5 billion in adjusted EBIT.” Ford also went on to assume that the second half of 2022 would see improved semiconductor availability, vehicle wholesale volumes increasing 10% to 15% over 2021, and ongoing investment in the Ford+ plan that hopes to make customer experiences better to create an even more loyal customer base.
As for Rivian, they’ve introduced a new Chief Sustainability Officer that handles concerns about the company’s impact on the environment. The company also recently announced a partnership with Clearloop that aims to work on a solar project that would introduce a megawatt of renewable electricity. These are positive gestures in the EV market, but introducing new models like the concepted R1S or an affordable compact EV may be a step in the right direction to increase their stock price once again. Getting more R1T trucks into production wouldn’t hurt either.