The ongoing semiconductor shortage has affected countless firms across the globe. Only last month, Ford announced it would be shutting down some of its North American factories for a few weeks due to the effects of the chip shortage.
Surprisingly, the U.S. automaker has just raised its 2021 profit forecast after an unexpectedly good quarter, a report from Reuters explains. The report states that higher prices on Ford's more profitable models, such as its SUVs and pickups, helped increase revenue in North America.
However, Ford has also built and stored between 60,000 and 70,000 vehicles without chips, according to the company's Chief Financial Officer John Lawler, as The Washington Post reports. The vehicles are waiting in storage and will be retrofitted when the required parts eventually become available, he explained.
With the effects of the chip shortage causing a lack of vehicle supplies, Ford and other manufacturers set their focus on higher-margin products. According to Reuters, this allowed the company to boost its revenue by almost $5,000 per vehicle in the last quarter, leading to an additional $1.5 billion in operating profit.
When will the chip shortage end?
Ford CEO Jim Farley said the company is "seeing signs of improvement in the flow of chips now in the third quarter, but the situation remains fluid." Ford is reportedly stockpiling semiconductors and other critical parts when available, in order to meet the requirements for building its vehicles.
Last month, Ford announced temporary factory closures due to the effects of the global chip shortage, which was caused in part by increasing demand for electronics for leisure, for stay-at-home students, and for remote work amid the pandemic. As great parts of the world went into lockdown, factories responsible for making the semiconductors and other parts required for these electronics were forced to shut down, meaning the high demand was met with reduced production capacity worldwide.
A June report by IEE Spectrum states that "a variety of analysts agree that the most problematic shortages will begin to ease in the third or fourth quarter of 2021," with chip manufacturers adding more capacity to meet the increased demand.
Impressively, despite the effects of the ongoing chip shortage, Ford — which has new highly sought-after models including the Mustang Mach-E — raised it's full-year operating profit estimate by roughly $3.5 billion, taking it to almost $10 billion. Its shares subsequently rose 3 percent to a high of $14.34.