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Ford suspends all F-150 production after fire at supplier

May 10, 2018

Due to a component shortage after a fire at one of its suppliers, Ford Motor Company announced Wednesday it is suspending all production of its best-selling F-150 trucks.

The fire at Meridian Magnesium Products of America in Eaton Rapids, Mich. occurred May 2, injuring two people, forcing nearly 150 people to evacuate the building, and destroying portions of the roof, according to The Lansing State Journal. In a news release yesterday, Meridian Magnesium General Manager George Asher said the company is “planning to recall some employees for critical operations as soon as possible.”

With the Eaton Rapids supplier offline, Ford has suspended F-150 production at its Kansas City, MO Assembly Plant and Dearborn Truck Plant, along with Ford F-Series Super Duty production at its Kentucky Truck Plant in Louisville. Executive Vice President and President of Global Operations Joe Hinrichs said that Ford “is confident that any impacts will be short term,” and indicated that inventories of the F-150 are “strong.” The Associated Press reports that Ford has an 84-day supply of trucks at its dealerships.

Other car manufacturers are also affected, including Mercedes, BMW, and General Motors. However, according to Michelle Krebs, executive analyst at Autotrader, the impact on Ford is disproportionate. “The F-150 is its largest volume product, it produces the most profits for Ford, it is the bread and butter of Ford, so it’s a critical product in the Ford line,” says Krebs.

She adds that it’s too early to tell what the overall effect will be on Ford’s earnings. If Meridian is able to begin producing parts again quickly, Ford will be able to make up for lost production time by adding extra shifts. But if the parts shortage continues, inventories of F-150 trucks at dealerships would dwindle.

“The inventory at dealerships will drop, consumers looking to buy an F-150 will have less choice, and it comes at a time when their competitors are introducing new products,” says Krebs.

Ford expects a negative financial impact in the near term, but has not adjusted its fiscal targets for the year. Ford shares rose 10 cents to $11.16 Thursday morning.

About 7,600 workers are on temporary layoff because of the fire, according to AP.

Update, Thursday, May 17 at 3:30 p.m.

In a press release on Wednesday, Ford said it will restart F-150 production at its Dearborn Truck Plant this Friday, and at its Kansas City Assembly plant by Monday. Super Duty production at its Kentucky Truck Plant should also resume by Monday.

“While the situation remains extremely dynamic, our teams are focused on returning our plants to full production as fast as possible,” said Joe Hinrichs, Ford president, Global Operations. “The ramp-up time to full production is improving every day."

Ford expects an adverse impact of $0.12 to $0.14 per share in the second quarter due to interrupted production caused by the fire at Meridian.