'Production Disruptions Lead to Higher New Car Prices' Ford Q2 Earnings Exceed Expectations

by Park Pyunghee

Published 29 Jul.2021 11:28(KST)

[Photo by AP Yonhap News]

[Asia Economy Reporter Byunghee Park] American automaker Ford Motor Company has announced second-quarter earnings that exceeded expectations despite the adverse impact of a shortage in automotive semiconductor supply. The supply disruption led to an increase in the average price of new vehicles, resulting in profits about ten times higher than Wall Street forecasts.

On the 29th (local time), Ford reported second-quarter operating income of $1.1 billion, turning profitable from a $1.9 billion loss in the same quarter last year. Ford's second-quarter net income far surpassed the Wall Street analyst consensus of $167 million compiled by Bloomberg. While Wall Street had expected a loss of 5 cents per share, Ford achieved a net income of 13 cents per share.

Second-quarter revenue rose 38% year-over-year to $26.8 billion, also exceeding the expected $23 billion.

Ford revised its full-year operating income forecast to $9 to $10 billion, raising it by about $3.5 billion from the previous estimate. The company expects sales to increase by approximately 30% in the second half of the year.

However, despite the sales growth, Ford anticipates that operating income in the second half will be lower than in the first half. John Lawler, Ford's Chief Financial Officer (CFO), stated that the decrease in operating income due to rising raw material costs will amount to $2 billion.

Like other automakers, Ford had to halt factory operations for an extended period due to semiconductor supply shortages, and a fire at its Japanese plant earlier this year further dampened expectations for its first-half performance.

The production decline caused by the semiconductor shortage was less severe than expected. While Wall Street had anticipated a production shortfall of 1.1 million vehicles, Ford reported the actual shortfall was 700,000 vehicles.

The supply reduction unexpectedly translated into a positive factor: an increase in new vehicle prices. According to automotive market research firm Cox Automotive, Ford's average new vehicle price soared to an all-time high of $47,446 due to the supply disruption.