Ford Slips as Chip Shortage Remains Barrier

This post was originally published on this site — Ford dropped after reaffirming that the global semiconductor shortage could hurt earnings by as much as $2.5 billion.

Ford confirmed its guidance announced last month, reiterating that a lack of chips could hurt adjusted earnings before interest and taxes by between $1 billion and $2.5 billion, net of reasonable cost recoveries and some production make-up in the second half of the year.

Shares are down almost 4%, though still trading close to the highest in about five years. 

The company reported adjusted EBIT of $1.7 billion for the fourth quarter of 2020 and is set to earn $8 billion to $9 billion in adjusted EBIT next year, generating $3.5 billion to $4.5 billion in adjusted free cash flow. The scenario anticipates continued earnings improvement in each of Ford’s regional businesses, except South America, where it recently abandoned Brazil.

Last month, the company said the global semiconductor shortage is creating uncertainty across multiple industries and will influence Ford’s 2021 operating results. 

“The semiconductor situation is changing constantly, so it’s premature to try to size what availability will mean for our full-year performance,” Chief Financial Officer John Lawler said in a statement at the time. “Right now, estimates from suppliers could suggest losing 10% to 20% of our planned first-quarter production.”

“Our team is working with suppliers around the clock to optimize the constrained supply and minimize profit impact, while prioritizing customer orders, new-vehicle launches and compliance with CO2 emissions regulations,” said Lawler. Ford plans to provide an update on the semiconductor issue when it reports first-quarter 2021 financial results on April 28.