Ford CEO Says Chip Shortage Has Changed 'Normal' Forever, Automaker To Keep Inventories Low Post-Crisis

Ford Motor Co’s F CEO Jim Farley said on Wednesday he expects the ongoing semiconductor shortage situation to get better sometime in 2022, without specifying a sharper timeline.

What Happened: The No. 2 U.S. automaker by volume is relying on tight inventory amid strong demand to tide over the ongoing chip shortage and sees visibility getting better in the second half of the year.

“The issue is that the demand is so high right now globally for Ford, we are going to run our inventories historically lower. Our normal has changed,” Farley told investors at the Deutsche Bank’s Global Auto Industry Conference held virtually.

“In 2019, we were up to 100 days supply with the F-Series. We’re not going to do that again,” Farley said. 

U.S. automakers including Ford are seeing a strong demand and record low inventories at dealerships due to the ongoing chip shortages. 

The total U.S. new vehicle inventory fell to 1.78 million units at the end of May, down from 2.24 million in April, as per Cox Automotive analysis. Inventory near the end of May was running 43% behind levels for the same period in 2020 and 54% below the same timeframe in 2019, as per Cox Automative. 

See Also: Ford Raises 5-Year EV Investment Target To $30B After High-Flying F-150 Lightning Launch: All You Need To Know

Why It Matters: Automakers have looked to minimize the impact of tight inventories on sales by prioritizing building their most profitable models first. 

“Supply was much lower in May than in April, but it is hard to say sales have been negatively impacted yet,” said Charlie Chesbrough, Cox Automotive senior economist.

Ford plans to keep inventories low even after the chip crisis is over and believes the shortage is a huge opportunity for the industry to learn how to manage the supply chain “differently” and “effectively.” 

Earlier in the day, Ford announced a strong second quarter guidance and said it is seeing robust demand and pre-orders for all four recent launches: a full-size Bronco SUV, a battery-electric F-150 Lightning pickup, a Maverick compact truck and all-electric E-Transit commercial van.

Price Action: Ford shares closed 1.7% lower at $14.77 on Thursday after rising initially following the strong forecast.