Ford to update financial impact of global chip shortage next month

01 April 2021 - 08:10 By Reuters
Ford is one of the many car manufacturers impacted by the global chip shortage.
Ford is one of the many car manufacturers impacted by the global chip shortage.
Image: Maja Hitij/Getty Images

Ford Motor Co said on Wednesday, while announcing the latest North American production cuts at seven assembly plants due to the global chip shortage, that it would provide an update on April 28 on the expected hit to its 2021 profit.

The US automaker previously said its operating profit this year would be reduced by $1bn to $2.5bn (roughly R37bn). The update to that forecast will be provided when Ford reports first-quarter results on April 28.

A Ford spokesperson declined further comment on how the forecast would change, but Wednesday's actions include shutting down for two weeks Ford's Dearborn Truck Plant in Michigan, where it builds the top-selling F-150 full-size pickup truck. Ford and other automakers have repeatedly said they would prioritise the production of their highest-margin vehicles.

Ford has previously cut production of the F-150 and in some cases partially built and parked the vehicles for final assembly later when enough chips were in hand.

Industry officials told Reuters this week the chip shortage would be worse in the second quarter than in the first, and it was not clear if supplies would recover in the third quarter and whether automakers could make up all the lost production later this year.

“We are no way near out of the woods yet,” said John Bozzella, who heads a major auto trade group. “It’s unclear how much further it goes. Certainly the second quarter continues to be more challenging than the first, but we’ll have to see how things continue to play out.”

Research firm IHS Markit increased its estimate for lost production globally on Wednesday.

US rival General Motors Co previously said its 2021 profit could be shaved by up to $2bn (roughly R29.7bn) due to the chip shortage.

Earlier on Wednesday, GM CFO Paul Jacobson, speaking at a Bank of America conference, said he still felt comfortable with the company's 2021 profit forecast despite the chip shortage. GM said in February that, including the chip hit, it expected to earn $4.50 to $5.25 a share this year.

The chip shortage came as North American auto plants were shut for two months during the Covid-19 pandemic last year and chip orders were cancelled, and as demand surged from the consumer electronics industry as people worked from home and played video games. That has now left carmakers competing for chips.

Semiconductors are used extensively in cars, including to monitor engine performance, manage steering or automatic windows, and in sensors used in parking and entertainment systems.

In addition to shutting the Dearborn plant for the weeks of April 5 and April 12, Ford said on Wednesday it will idle the truck side of its Kansas City, Missouri, plant the week of April 5, and shut down its Louisville Assembly Plant the weeks of April 12 and 19. It is idling its Oakville plant in Canada for three weeks, starting April 12.

Ford also is cutting overtime shifts at plants in Dearborn, Kansas City, Chicago and Avon Lake, Ohio.


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