F-Series Supplier Fire – a Threat to Ford Motor Profitability

AutoInformed.com on 2016 U.S. Auto SalesFord Motor Company finally said today that it is working to mitigate U.S. production losses after a May 2 fire at a parts supplier. Parts shortages from Meridian Magnesium Products of America’s disabled plant is  is shutting down F-150 and Super Duty production at Ford’s Kansas City Assembly, Dearborn Truck and Kentucky Truck plants. However, Ford has a whopping 84 days of supply of trucks as gasoline prices are rising once again.

Ford says it takes less than a third of the volume of from the Meridian plant in what is a meaningless distinction because the F-Series is the foundation of the profitability of Ford in North America – a foundation that was already showing signs of cracks. (see AutoInformed.com on Failing Grade for Ford Motor Q1 Earnings, Failing Grade for Ford Motor Q1 Earnings)  Ford claims that while the shortage will hurt near-term Q2 results, the company’s guidance of  an adjusted EPS in the range of $1.45 to $1.701 for the full year is unchanged thus far.

“This is a fluid situation, but we are working closely with our supplier partners to do everything we can to limit the impact on our production,” said Joe Hinrichs, executive vice president and president of Global Operations. “It’s a full team effort and we’re confident that any impacts will be short term. The good news is we have strong inventories of our best-selling F-Series pickups and other vehicles, and customers won’t have a problem finding the model they want.”

Translation: FMC management doesn’t know how long the potential problem will last. (editor’s note: as of 5/11 FMC says it should recover by the end of 2018.)

Missing as the Smoke Clears

Current negative impacts from the supply shortage:

  • F-150 production is suspended at Kansas City (Mo.) Assembly Plant and will also be suspended at the Dearborn (Mich) Truck Plant at the end of the afternoon shift tonight;
  • Ford F-Series Super Duty production is down at Kentucky Truck Plant in Louisville. Ford expects Super Duty production to continue at Ohio Assembly Plant in Avon Lake.

1 Adjusted earnings per share is a non-GAAP financial measure. Ford does not provide guidance on an earnings per share basis, the comparable GAAP financial measure. Ford’s earnings per share in 2018 will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB  (other postretirement benefit plans) remeasurement gains and losses.

 

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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