Ford Motor Co. (NYSE: F) made a shattering announcement recently. Its costs would be $1 billion above expectations in the third quarter of the year. Adjusted earnings before interest and taxes will be between $1.4 billion and $1.7 billion, which is another disappointment. The trouble does not end there. Ford has 40,000 to 45,000 vehicles that cannot be delivered when expected because of parts problems.
Ford’s announcement shows that management has been flat-footed in addressing its supply chain trouble. This far along in the third quarter is extremely late to disclose a third-quarter debacle. No one in senior management was affected by the announcement. Down the management chain, Ford said it would restructure the teams that oversee production.
Doug Field, chief of advanced technology and embedded systems at Ford, will quarterback the attempt to “strengthen product creation” and global supply chain improvement. Field, one would think, already has his hands full with his current assignment. Two people who helped run supply chain operations will “retire.”
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Ford has a growing set of management problems as it tries to turn itself into a next-generation global car manufacturer. First among these is that it did not anticipate the costs of some key components of the Ford F-150 Lightning and the Mustang Mach-E. It decided to raise prices by several thousand dollars each because it suddenly discovered it would lose money on every sale. Sales undoubtedly will be affected as consumers unexpectedly face more expensive vehicles. The announcement also begs the question why Ford management came to these conclusions so late.
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Wall Street has punished Ford for its poor decisions by driving shares down almost 40% this year. Until recently, Ford was one of the better performing among widely traded stocks.
The problem cannot be lost on the Ford family, the fortunes of which rely heavily on the stock price. William Ford Jr., the executive board chair, guards that fortune and has to be as disappointed as any investor.
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