It is possible that a new production strategy will be developed.
Many automakers are suffering financial losses due to the ongoing shortage of chips worldwide. Ford is one of them. It is also losing ground on both sides of the big lake in terms of deliveries and sales. The Blue oval company saw a $1.5 billion increase in operating profit for the second quarter due to the increased sales of premium SUVs and trucks. Ford still has some levers to pull and Jim Farley, Ford’s boss, knows where to look.
Farley acknowledged that Ford is losing money through incentive campaigns in a recent interview with Reuters. This may require a shift in Ford’s production strategy. Farley stated that instead of building vehicles according to predetermined specifications, the automaker would prefer to build vehicles to order and reduce inventories.
Farley stated that he knew we were wasting money on incentives. “I don’t know where. We’re really committed to moving to an order-based system, and to keeping inventories at 50-60 days’ supply.
Ford isn’t the most generous automaker in terms of incentives, but it still wastes millions on various discounts for customers. The automaker recently announced that it would offer a $1,000 bonus to customers who are willing to wait for their product to arrive.
Ford reports an operating profit of $1.1billion despite production disruptions. This gives Ford an adjusted forecast between $9 billion to $10 billion earnings before taxes and interest. Ford’s chip shortage caused about 700,000 production losses for the whole industry in the second quarter. However, Ford believes it is “spring-loaded to grow,” John Lawler, Ford CFO stated during a conference call.