Ford Overcomes Semiconductor Shortage to Post Q2 Profit

The global shortage of semiconductor chips continues to curtail production, but Ford nevertheless managed net second-quarter income of $561 million and raised its anticipated full-year earnings.

“We really leaned into allocating chips to our higher profit vehicles,” John Lawler, Ford’s chief financial officer, says in a conference call with reporters. “Pricing remained very strong, much higher than we thought it would.”

As the semiconductor shortage worsened, Ford said in April it expected to lose about 50% of its planned second-quarter production, which would have resulted in a loss in the period. Profits were down 50% from $1.1 billion in the second quarter a year ago, and the automaker lost production of about 700,000 vehicles due to the chip shortage.

But Ford says it leveraged “strong demand to optimize revenue and profits through lower incentives and a favorable mix of vehicles, resulting in companywide adjusted earnings before interest and taxes of $1.1 billion.” Earnings were 13 cents a share on revenues of $26.8 billion.

“Despite the many headwinds from the semiconductor shortage, some of which were unique to Ford, our team skillfully managed our business,” President and CEO Jim Farley says. “I can tell you that this outcome was far from certain at the beginning of the quarter.”

Farley (pictured below, with battery-electric F-150 Lightning pickup) says Ford is seeing “signs of improvement in the flow of chips” in the current quarter, but the situation remains “fluid,” a sentiment expressed earlier by Tesla CEO Elon Musk.

Combined U.S. retail orders for the battery-electric Mustang Mach-E and other Ford vehicles was seven times larger than at the end of second-quarter 2020, Ford says. With additional current and anticipated demand for models including the Bronco SUV and, later, Maverick and F-150 Lightning pickups, Farley says the company is “spring loaded” for a rebound when semiconductor supplies improve.

The company says sales volume is expected to increase about 30% from the first to the second half of the year. But despite the increase, Ford says its operating profit will be weaker in the second half, with Lawler citing commodity costs, lower earnings from Ford Credit and other factors such as higher warranty costs.

Jim Farley with F-150 Lightning (Getty)_0

Ford raised its expectation for full-year adjusted earnings before taxes by about $3.5 billion, to between $9 billion and $10 billion.