Last week Ford’s CEO Jim Farley stated that the semiconductor chip shortage has shaken up the way Ford Motor Company does business moving forward. Farley stated that Ford is committed to moving to an order-based system, keeping inventories at 50-60 days supply, during Ford’s Q2 2021 earnings conference with investors. The semiconductor crisis has also forced Ford to focus on producing its higher-margin products, which boosted revenue by nearly $5,000 per vehicle in Q2 and added $1.5 billion to the automaker’s operating profit.
Ford recently admitted that its inventory will never return to its pre-COVID-19 highs and that the pandemic had taught it how to turn inventory faster. Vehicles that end up languishing at dealer lots have historically required heavy incentives to sell. However, the global chip shortage has forced automakers, including Ford, to slash production, leading to record-low inventory on dealer lots.
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