The news feels like a cold shower for the many consumers who have waited many months to receive the vehicles they have ordered.
For those who have just ordered new vehicles, the news is also making the delivery schedules for their cars uncertain.
Ford engine (f) has just said that the supply chain problems of many companies, but especially vehicle manufacturers, are far from solved.
The Covid-19 pandemic has both triggered and exacerbated these difficulties. Societal lockdowns to curb the spread of the virus have forced automakers to shut down factories in certain regions. Semiconductor shortages forced them to stop producing certain models.
Russia’s February 24 invasion of Ukraine sent commodity prices skyrocketing, increasing costs and making procurement difficult, particularly for electric vehicles. Both countries are suppliers of materials needed to manufacture electric vehicles.
The reopening of the various economies gave hope that the supply situation was beginning to improve. In addition, comments about a drop in demand for semiconductors gave hope that the lack of chips is history.
All of this seems like a mirage now, as Ford just said the number of partially manufactured vehicles is currently between 40,000 and 45,000. The Dearborn, Michigan giant adds that it won’t be able to complete production until the end of the third quarter because it doesn’t have all the parts.
This means that the dealers who were supposed to receive these vehicles for sale in Q3 will not receive them as planned. And for customers of these vehicles, the wait will continue.
“The supply constraints will result in a higher than planned number of ‘vehicles on wheels’ being built but remaining in Ford’s inventory awaiting needed parts at the end of the third quarter,” Ford said in a regulatory filing.
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“The company expects these vehicles — an expected 40,000 to 45,000 of them, mostly high-margin trucks and SUVs — to be completed and sold to dealers in the fourth quarter.”
According to industry sources, the missing parts are not semiconductors or other technological parts. Ford does not say which parts are missing and which models are affected.
The company isn’t the only automaker still reeling from supply chain issues. Last July, General Motors (GM) warned of having 95,000 vehicles in its inventory, the production of which is not yet fully completed due to missing components.
Ford also warned of the flagging economy and the impact of inflation, which is at its highest in 40 years.
Like FedEx (FDX) MC Donalds (MCD) and General Electric (GE) the company fears the economy will fall into recession as the Federal Reserve begins a two-day currency meeting that should end with another rate hike.
“Based on recent negotiations, inflation-related supplier costs in the third quarter will be approximately $1 billion higher than originally expected,” the old automaker warned.
In the longer term, it is more than possible that automakers will decide to pass this additional and unexpected cost increase on to consumers in the form of higher vehicle prices.
In the short term, this will eat away at earnings for the company, which now expects third-quarter adjusted earnings before interest and taxes to be in the range of $1.4 billion to $1.7 billion. That’s well below the $3.7 billion in adjusted EBIT that Ford reported in the second quarter.
Ford will release its quarterly results on October 26th.