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.

1. POST-PANDEMIC EFFECT: FORD CUTTING DOWN PRODUCTION
VOLUME
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Materials

2. 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.
Ford Chief Financial Officer John Lawler said the
production losses stemming from the semiconductor
shortage could lower Ford's adjusted earnings by USD 1
billion to USD 2.5 billion in the same quarter. It also stated
that the company would continue to prioritize and allocate
chips to the highest-margin vehicles when it can. It's going
to be a logistic effort to do that in moving forward during
pandemic situations.
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3. Ford Cutting Down Production Volume due to Pandemic Effect
Ford cut production of the nation's top-selling pickup and
Ford's most profitable vehicle: The F-150. The automaker is
dropping one shift from its truck plants in Dearborn, Michigan,
and Kansas City, Missouri, with both sites expected to resume
full production starting on 15 February 2021. Ford's headache
caused by the shortage has now grown into a migraine as
deliveries of the redesigned F-150 dropped 5% in January.
In February 2021, it was already predicted that the chip
shortage would dent global car industry production by about
672,000 vehicles in the first quarter, with problems lingering
into the fall. Also, the lead times for chips used in the auto
sector typically are 26 weeks.
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Ford Cutting Down Production Volume due to
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4. 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
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5. The only thing that impacts F-Series sales is if Ford, for some reason, cannot make enough trucks to meet demand (That
happened in March). The pandemic forced automakers to stop making vehicles for a brief time and subsequently affected
Ford's North American profits.
It is a global shortage of semiconductor chips affecting Ford (and others), forcing the automaker to cut production at the
Dearborn Truck Plant in Michigan from three shifts to one for a week beginning on 8 February 2021. The Kansas City Assembly
Plant in Missouri will go down to two shifts, idling the third. Both plants will return to three shifts the week of 15 February
2021.
Ford previously shut down a plant in Louisville, Kentucky, which makes the Ford Escape and the Lincoln Corsair for a week and a
facility in Germany for a month.
Automakers and parts suppliers began warning of a semiconductor shortage late last year after demand for vehicles rebounded
stronger than expected following a two-month shutdown of production plants due to the coronavirus pandemic.
Ford's confirmed plans come a day after General Motors (GM) said it would take down production next week at four assembly
plants in Fairfax, Kansas; Ingersoll, Ontario, and San Luis Potosi, Mexico. GM will also run a plant in South Korea at the half
capacity that week.
From Nissan Motor to Volkswagen, Ford and other automakers have previously cut vehicle production due to the chip shortage.
Kumar Galhotra, Ford president of the Americas and international markets, described the chip shortage earlier this week as a
"very dynamic situation." He said the company has been working with its suppliers to mitigate its plants' impact and resolve the
issue as quickly as possible. Also, he said that it's changing all the time, but we think we will be dealing with it for at least the
first half of this year.

6. 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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