Ford's adjusted earnings by USD 1 billion to USD 2.5 billion in the same quarter - Pukka partners

 Ford Motor Company recently said that it is cutting shifts at two plants that build its highly profitable flagship F-150 pickup trucks starting next week due to a global shortage of semiconductor chips and warned the issue could result in the loss of 10% to 20% of planned first-quarter production in 2021.

Ford, the No. 2 US automaker, stated that it would run one of three shifts of production at its Dearborn Truck Plant the week of 8 February 2021, while the truck portion of its Kansas City Assembly Plant will run two of three shifts of production during that week. Both are expected to return to three shifts the following week.

Global automakers have been caught off guard by the shortage of crucial semiconductors, used for everything from computer management of engines to driver-assistance features such as emergency braking. General Motors Co, Toyota Motor Corp, Volkswagen AG, Nissan Motor Co, and Subaru Corp. are the other automakers hit by the component shortage.

Automakers are looking to fast-track plans for agile manufacturing processes and supply chains as they prepare for a volatile demand environment after the Covid-19 global pandemic. In fast-moving mass production industries such as automobiles, production schedules are rigid and optimized for efficiency. Similarly, supply chains work on schedules decided months in advance based on demand projections. However, carmakers like Ford are now looking to redesign these systems to cater to an unpredictable demand environment.

Read More :- https://www.pukkapartners.com/insight/post-pandemic-effect-ford-cutting-down-production-volume

Ford forced to cut profitable F-150 pickup truck production due to semiconductor chip shortage

  • Ford is cutting production at plants in Missouri and Michigan that produce its profitable F-150 pickup trucks due to a global semiconductor chip shortage
  • The shortage began impacting the global automotive industry in late 2020
  • Semiconductors are extremely important components of new vehicles, for areas ranging from infotainment systems to more traditional parts such as power steering
  • Ford has cut production schedules for several SUV models, including the Explorer, built at its factory in Chicago

Ford in Number

The company has found another USD 11.5 billion in cost cuts and efficiencies, bringing the total to USD 25.5 billion expected by 2022, Chief Financial Officer Bob Shanks told reporters. Savings will come from engineering, product development, marketing, materials, and manufacturing. The company previously predicted USD 14 billion in cuts by 2022.

Ford also promised to raise its operating profit margin from 5.2% to 8% by 2020, two years earlier than a previous forecast. That includes a 10% pretax margin in North America. The company said its first-quarter net income rose 9% due mainly to a lower income tax rate.

Ford made USD 1.74 billion from January through March 2021, or 43 cents per share, compared with USD 1.59 billion, or 40 cents per share a year ago. Revenue rose 7% to USD 41.96 billion.

Earnings and revenue beat Wall Street estimates. Analysts polled by FactSet expected 41 cents per share on revenue of USD 36.78 billion. As usual, North America drove Ford's profits for the quarter with pretax earnings of USD 1.9 billion.

Ford will cut USD 5 billion from capital spending from 2019 to 2022, reducing it from USD 34 billion to USD 29 billion. The company will spend less on low-performing areas such as cars. It identified Lincoln as a low-performing area, but Shanks said sales are growing, and the brand is not in jeopardy. More capital will be allocated to higher performing areas such as trucks and sport utilities, he said.

Highlights for 2021 include the return of the Ford Bronco 2021. Farley said orders for the SUV are being taken now, and there are close to 200,000 reservations for the model. Also hitting dealers this summer is the 2021 Ford F-150 Raptor performance pickup.

The major lowlight related to a shortage of semiconductors, which is subsequently forcing plant shutdowns. Ford could lose up to 20% of planned production this quarter.

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