clearn.png
Monday November 29th, 2021 6:49AM

Ford posts profit, says chip shortage may cut production 50%

By The Associated Press
Related Articles
  Contact Editor

DETROIT (AP) — Ford Motor Co. posted a surprising $3.26 billion first-quarter net profit on Wednesday, but the company said a worsening global computer chip shortage could cut its production in half during the current quarter.

Chief Financial Officer John Lawler said the second quarter should be the low point for the chip shortage, but it probably will last into next year. The situation will improve in the second half, but Ford still will see production fall 10% over original plans, he said. That means Ford won't be able to make up for any lost production this year. But CEO Jim Farley said Ford will work to limit the 10% cut.

The company expects to lose factory output of 1.1 million vehicles for the year, up from an earlier estimate of 200,000 to 400,000. That will mean fewer vehicles to sell, but thus far it's brought higher prices because demand is strong.

Nearly all automakers are struggling with the chip shortage, caused by semiconductor makers switching their factories to more profitable consumer-electronics processors when auto plants closed due to the coronavirus last year. The auto factories came back faster than expected, but the chip makers didn’t quickly switch their factories back to automotive-grade chips.

Farley said at first, the company thought it could make up lost production later in the year. But a March fire in Japan at a Renesas Electronics Corp. chip foundry made things much worse. Renesas supplies about two-thirds of the auto industry’s chips, including nine top-tier parts makers for Ford, Farley said. Other chip makers haven’t shifted from consumer electronics to make more automotive chips, he said. Auto chips have to meet tougher specifications to handle weather extremes and vibration.

“We’ve yet to see significant new (factory) capacity come online for our industry,” Farley said, adding that the company now estimates that recovery will stretch into the fourth quarter or even next year.

Renesas, he said, expects to return to full production in July.

Ford also said it has built about 22,000 vehicles without some computers due to the shortage, and it will retrofit them when chips become available.

Excluding non-recurring items, the Dearborn, Michigan, automaker made 89 cents per share from January through March, trouncing Wall Street estimates of 22 cents per share. Quarterly revenue was $36.23 billion, beating analysts’ estimates of $36.13 billion, according to FactSet.

Lawler attributed the large profit to Ford’s years of restructuring to make the company leaner, as well as higher prices for its vehicles due to tight inventories.

Ford now predicts full-year pretax income to be between $5.5 billion and $6.5 billion, including a $2.5 billion cut due to the chip shortage. In February it estimated the shortage could reduce its full-year pretax earnings by $1 billion to $2.5 billion.

Investors apparently weren’t happy with Ford’s outlook for the year due to the chip shortage. Company shares fell 2.7% to $12.09 in extended trading Wednesday.

Lawler said the company's decision to allocate capital to develop more higher-profit trucks and SUVs is paying off with higher margins.

“You're seeing that flow through with the strong products,” he said. Since 2019, Ford’s average vehicle sales price is up $1,900 over the industry average, he said.

He also said the company has cut warranty costs by $400 million from the first quarter a year ago. Ford’s first-quarter earnings included a $902 million noncash gain on Ford’s investment in electric vehicle startup Rivian.

Ford did benefit from the chip shortage, especially in North America, its most profitable market. Lower production made vehicles more scarce, driving up prices as Ford shifted production to higher profit versions of vehicles like the top-selling F-Series pickup truck.

The company only had enough inventory March 31 to supply about 33 days of consumer demand. Ford, like other automakers, is looking at keeping lean inventories after the chip shortage passes, Farley said. That could mean fewer discounts and higher prices for consumers.

During the quarter, Ford sold more than 521,000 vehicles in the U.S., up 1% from a year earlier. Helped by strong pickup truck sales, the average sale price of a Ford vehicle was $47,858, more than 8% higher than the same period last year, according to Edmunds.com.

Jessica Caldwell, Edmunds’ executive director of industry insights, said the chip shortage could diminish what should be a highly profitable year for Ford, which was recovering from an old product lineup and production problems.

The automaker should be making big dollars based on high prices, Caldwell said.

“Ford is hanging on tight for now, but might find itself in a less secure position as this chipset shortage continues with no immediate end in sight,” she said.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Corporate News, AP Business - Economy
© Copyright 2021 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Ford posts profit, says chip shortage may cut production 50%
Ford posted a surprising $3.26 billion profit in the first quarter, but the company says a worsening global computer chip shortage could cut its production in half during the current quarter
7:04PM ( 10 minutes ago )
Louisville officer shot in Breonna Taylor raid retiring
The Louisville police officer who fired at Breonna Taylor after being shot during the deadly raid on Taylor’s apartment is retiring
6:58PM ( 16 minutes ago )
Senate votes to reinstate methane rules loosened by Trump
Congressional Democrats are moving to reinstate regulations designed to limit potent greenhouse gas emissions from oil and gas fields
6:55PM ( 19 minutes ago )
Associated Press (AP)
Police: 4 people killed in German hospital, woman detained
German police say a woman has been detained after four people were found dead at a hospital in the eastern city of Potsdam
6:14PM ( 59 minutes ago )
Biden to the nation: We're 'turning peril into possibility'
President Joe Biden will use his first joint address to Congress to declare the nation is “turning peril into possibility, crisis into opportunity."
5:40PM ( 1 hour ago )
The Latest: Biden to call for Medicare drug cost negotiating
The White House says President Joe Biden’s speech to Congress will call on lawmakers to lower prescription drug costs by acting this year to empower Medicare to negotiate prices
5:36PM ( 1 hour ago )
AP Business
Facebook reports soaring quarterly ad revenue, stock jumps
Facebook’s stock is up after the social media giant reported stronger-than-expected results for the first quarter thanks to soaring ad revenue
4:51PM ( 2 hours ago )
Apple profit soars in latest quarter on higher iPhone sales
Demand for the iPhone led Apple's profits to more than double in the January-March period as the tech giant continued to capitalize on smartphone addiction
4:42PM ( 2 hours ago )
Supreme Court affirms block of key PolyMet mine permit
The Minnesota Supreme Court has handed a victory to environmentalists in the long-running battle over the proposed PolyMet copper-nickel mine
4:15PM ( 2 hours ago )
AP Business - Corporate News
Fed keeps key rate near zero, sees inflation as 'transitory'
The Federal Reserve is keeping its ultra-low interest rate policies in place, a sign that it wants to see more evidence of a strengthening economic recovery before it would consider easing its support
4:52PM ( 2 hours ago )
US stock indexes mixed after Fed leaves rates unchanged
Major U.S. stock indexes are mixed in afternoon trading Wednesday after the Federal Reserve said it is leaving its key interest rate unchanged near zero, while noting recent improvement in the economy
3:34PM ( 3 hours ago )
Biden to pitch sweeping 'family plan' in speech to Congress
President Joe Biden will use his first joint address to Congress to pitch a $1.8 trillion investment in children, families and education that would transform the role government plays in American life
2:57PM ( 4 hours ago )
AP Business - Economy
US indicts 3 on hate crime charges in death of Ahmaud Arbery
The Justice Department has announced federal hate crime charges in the death of a Georgia man who was killed while out for a run last year
7:03PM ( 11 minutes ago )
Louisville officer shot in Breonna Taylor raid retiring
The Louisville police officer who fired at Breonna Taylor after being shot during the deadly raid on Taylor’s apartment is retiring
6:58PM ( 16 minutes ago )
Senate votes to reinstate methane rules loosened by Trump
Congressional Democrats are moving to reinstate regulations designed to limit potent greenhouse gas emissions from oil and gas fields
6:55PM ( 19 minutes ago )
US eyes major rollback in Iran sanctions to revive nuke deal
The Biden administration is weighing a major rollback of some of the most stringent Trump-era sanctions imposed on Iran, in a bid to get the Islamic Republic to return to compliance with a landmark 2015 nuclear accord
6:54PM ( 20 minutes ago )
Deadly California arrest carries echoes of George Floyd case
Police in Alameda, California, are under fire over the death of a Latino man who was pinned to the ground for more than five minutes in an arrest that unfolded the same day a jury in Minneapolis began deliberating in the George Floyd case
6:53PM ( 21 minutes ago )