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Mayank Marwah
Mayank Marwah
Articles (627) 

Ford Halts F-Series Truck Production

Company has 84-day supply of F-Series trucks to manage the temporary shutdown

May 16, 2018 | About:

The Michigan-based automaker Ford Motor (NYSE:F) faced the production shutdown of its most profitable vehicle F-150 truck due to a fire that occurred at an auto plant in Michigan. The fire led to the shortage of some key components, which led to the disruption of the production process. In addition, the Blue Oval has shut down its Kansas City plant that manufactures F-150 due to a deficiency in parts.

Bird’s-eye view

As of now, the company is sitting with an 84-day supply of F-Series trucks in dealer inventories, which means that "customers won’t have any trouble finding the F-Series," the company announced in a statement.

Ivan Dury, Edmunds senior manager of industry analysis, commented: "When you have a vehicle that comprises a quarter of your company’s sales, any production disruption is going to cause some consternation."

He added: "This demonstrates the riskier side of Ford’s strategy to put all its eggs in the trucks and SUVs basket. When you’re more dependent on only a few models to drive sales, the company’s bottom line is much more sensitive to these kinds of unplanned setbacks."

The company would look to make sure that the production halt should not be long-term or else the same can adversely impact the company’s second quarter earnings. In April, the company built 29,572 trucks in Kansas City and 31,482 trucks in Dearborn. As a result, the company is in a position to weather a short-term production shutdown. There is no information regarding when the production process will get started.

Besides Ford F-Series pickups, the production of the Chrysler Pacifica minivan, the GMC Savana and Chevrolet Express full-size vans has been affected on account of a supply-chain disruption.

The Blue Oval has sold 287,000 units in the U.S. from January to Apri. That represents a gain of 4% from the same period last year. The sales also included larger trucks than the F-150. However, the F-150 contributed to a majority of those sales. In fact, F-150 sales during the period were four times the sales of Escape SUV.

Last word

F-Series pickups generate a huge amount of profits for the company, bringing in about $40 billion in annual revenue. That is more than yearly sales generated by companies, such as Facebook Inc. (FB) and Nike Inc. (NKE)

Emmanuel Rosner, an analyst with Guggenheim Securities LLC, commented: "The F-Series platform is critically important to Ford. We estimate it generates annual profits of at least $12 billion for the company, accounting for much more than the totality of Ford's global profit.”

Disclosure: I do not hold any position in the stock mentioned in this article.

About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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