Ford News: Is Ford moving to a Build to Order Format?

[G. David Felt]

Ford month of July saw Mach-e sales grow 15.8 percent, second largest in the electric SUV segment and sales taking off for the F-150 Hybrid, Bronco and a 23 percent climb in accessory sales as Ford continues it's conquest rate over Tesla and others.

Yet even as sales have climbed among a electric chip shortage, Ford has moved forward with offering employee buyouts to re-align the jobs and business model along a new path. 

First off Ford Motor Co. has started a voluntary buyout to employees in the U.S. as they plan to cut 1,000 positions as they reconfigure for growth. The Ford+ growth plan was released / divulged at its Capital Markets Day investor even in May. This is the start of the company diving into further digital services and electric vehicle development.

This buyout includes 6 months of salary and 6 months of health care as ford focuses on delivering products that contribute profit to the bottom line and are desired by global customers. This comes as Ford raises 2021 profit outlook.

Ford CEO Jim Farley stated in the Quarterly results that Ford has decided to move away from Dealerships stock piling 100's of auto's especially those that have less customer demand and requiring discounts to move them at the end of the year to make a sale. Ford is focusing on dealership inventories of no more than at most 50 to 60 days if not less as Ford wants demo units and will work with dealerships to move customers to an order-based system giving the customer truly what they want rather than what some purchasing manager creates for the lot inventory.

Farley stated they are wasting money on incentives and with chip shortages, Ford like all other OEMs is focusing on higher-margin products as Q2 of 2021 has shown with an average revenue of $5,000 per vehicle which added $1.5 billion to the operating profits of Ford. Ford sees an easing of chips which will allow them to stock pile critical components and has moved to dual-sourcing along with design interchangeability for better ease of moving internal components between product lines. 

Ford is estimating a 30% increase in global sales at it's dealerships for the second half of the year contributing to an estimated increase in operating profits by $3.5 billion with full operating profits for the year to be between $9 and $10 billion.

The chip shortage did cut production by about 700,000 units in Q2, yet Ford is very optimistic about the second half especially since the Ford Mach-e is on double digit growth with the bulk of the purchases custom orders.

This along with Ford's six figures of F-150 Lighting Electric truck reservations now is showing that people would rather pick what they want on an auto and wait than just pull from a dealership inventory.

This build-to-order is proving out with the large backlog of Bronco orders and the growing log of Maverick pickup orders.

The increase in sales, profitability and an overall shift by consumers to build-to-order is allowing Ford to plan and focus company free cash flow which is estimated to be between $4 and $5 billion for 2021 directed towards acquisitions, battery production, connectivity software and accessories for life style use by Ford Customers.

A very popular add on by Ford Ranger customers is the Tent / Canopy solution allowing people during this pandemic to get out and away from people to live life further embracing the build-to-order model.

This profitable quarter along with a shift away from incentive and heavy stock on dealership lots has been taken very positively by the stock market as Ford stock had a 3% gain in after hours trading almost reaching $15 a share.

The rest of this year is looking good as Ford continues to product the Bronco, Bronco Sport fulfilling pre-sales, the unibody compact pickup Maverick rumbles into the market as both a Hybrid and ICE with BEV on the horizon. Mach-e sales continue to conquest Tesla sales and continues to grow the backlog of orders and in the spring the F-150 Lightning comes to market already in high demand with over 120,000 reserved so far.

This would imply that like Tesla and Rivian, Ford future lays in a build-to-order model moving forward as Ford transitions away from ICE to a BEV portfolio.

Ford offers buyouts to salaried workers in effort to shed 1,000 jobs | Automotive News (autonews.com)

Ford Mustang Mach-E Sales Grew 15.8 Percent in July, Second Largest In Electric SUV Segment; New Vehicle Launches of F-150 Hybrid, Bronco, Mustang Mach-E Expand Ford’s Competitive Conquest Rate; Ford Accessory Business Climbs 23 percent, On Track To Post New Record | Ford Media Center

July Sales (ford.com)

Ford raises 2021 profit outlook, eyes shift to build-to-order | Reuters

Ford says reservations for F-150 Lightning electric pickup top 120,000 (cnbc.com)

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