Ford (F) outcome Q1 2021
Jim Farley, Ford CEO, takes off his mask at the Ford Built for America event at Ford’s Dearborn Truck Plant on September 17, 2020 in Dearborn, Michigan.
Nic Antaya | Getty Images
DETROIT – Ford Motor exceeded Wall Street’s expectations for the first quarter, but CEO Jim Farley warned that a persistent semiconductor die shortage would get worse before it gets better.
The company announced on Wednesday that it is now expected to lose about 50% of its planned production in the second quarter, up from 17% in the first quarter. According to the automaker, the increase is mainly due to a fire at the chip supplier Renesas Electronics for Ford and other automakers in Japan.
“We have more whitewater moments to navigate,” Farley told investors during the company’s first quarter earnings call. “The semiconductor shortage and the impact on production will get worse before it gets better.”
Ford CFO John Lawler was optimistic about the situation and said the company expected the semiconductor problem to bottom out in the second quarter and improve as the year progresses.
Lawler said the company expects to lose about 1.1 million production units in 2021 due to the shortage.
Ford’s shares were down about 3% in after-hours trading. The company’s market capitalization is more than $ 48 billion.
Here’s how Ford compared to Wall Street’s expectations based on Refinitiv’s average estimates.
- Adjusted result: 89 cents compared to the expected 21 cents
- Automobile sales: $ 33.55 billion versus $ 32.23 billion
The chip shortage has led automakers to set up lock factories around the world for different periods of time, resulting in vehicle inventories being scarce on dealer properties. However, the lower shipments have resulted in higher profits per vehicle, so automakers can continue to perform well despite the shortage.
Ford said Wednesday that adjusted pre-tax profit for the full year is expected to be between $ 5.5 billion and $ 6.5 billion, including an adverse effect of approximately $ 2.5 billion from semiconductor emissions. Adjusted free cash flow for the full year is projected to be between $ 500 billion and $ 1.5 billion.
The company had estimated it would post adjusted pre-tax profit of $ 8 billion to $ 9 billion in February. That didn’t take into account the semiconductor chip shortage, which the automaker has publicly stated could cut profits by $ 1 billion to $ 2.5 billion this year.
According to Lawler, Ford was able to offset the lost revenue from its reduced production in the first quarter with lower vehicle sales incentives, prioritizing production of more profitable vehicles and lower manufacturing costs, among other things. The automaker also benefited from higher profits from its Ford Credit funding arm.
Farley on Wednesday promised Ford would maintain lower vehicle inventories and support its profit per vehicle after the impact of the coronavirus pandemic and chip shortage.
The chip shortage is expected to cost the global auto industry $ 60.6 billion in revenue, according to consulting firm AlixPartners.
Correction: Ford kept its guidance for 2021. In an earlier version of the story, the instructions were given incorrectly.