Ford Idles Lucrative F-150 Plants on Worsening Chip Shortage
Ford Idles Lucrative F-150 Plants on Worsening Chip Shortage
(Bloomberg) -- Ford Motor Co. is idling production at two profitable truck plants that make its best-selling F-150 pickup as the global semiconductor shortage worsens.
The truck plant in Dearborn, Michigan, will shut for two weeks starting April 5, the automaker said Wednesday in an emailed statement. Ford will also cease production of the F-150 at its Kansas City plant next week. The company is canceling overtime shifts at both plants through June.
F-Series trucks are Ford’s biggest moneymakers and any lost production has a direct impact on the bottom line. The company is in the midst of rolling out a redesigned version of the F-150 and preparing to build a battery-powered model of the truck in Dearborn starting later this year.
Chief Executive Officer Jim Farley said last month that the chip shortage could cut Ford’s 2021 adjusted profit by $1 billion to $2.5 billion. The automaker said it would update that guidance when it reports first quarter results April 28.
The temporary shutdowns at the truck plants are only part of the idlings. Ford’s sport-utility vehicle factory in Louisville, Kentucky, will be down the weeks of April 12 and April 19. A plant in Oakville, Ontario, that makes the Edge crossover utility, will be off for three weeks beginning April 12.
The auto industry lost 1.3 million vehicles of production to the chip shortage in the first quarter, according to researcher IHS Markit. And the hit to production could be just as big in the second quarter after semiconductor plants have been taken out by the winter storm that devastated Texas and a fire at a major chip manufacturing site in Japan owned by Renesas Electronics Corp.
Automotive profits could drop by more than 25% this year due to the worsening crisis, Adam Jonas, a Morgan Stanley analyst, wrote in a March 26 note to investors. Auto sales, which have been unexpectedly strong since last summer, could begin to feel the pinch in the second quarter as inventory becomes scarce on dealers’ lots, analysts say.
“The 4Q earnings season narrative was that any shortfalls in production would be made up for by year end,” Jonas wrote. “This is probably not a relevant statement anymore.”
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