Ford is restructuring its C-suite with a greater focus on supplier relations as the automaker grapples with component constraints and ballooning supplier costs.
The automaker reported Monday that up to 45,000 vehicles will be built with parts missing by the end of the third quarter due to supply chain constraints. Those vehicles are now expected to be completed and sold sometime in the fourth quarter once necessary components are added.
Ford did not specify which parts were in short supply, but noted shortages largely affected the production of trucks and SUVs. President and CEO James Farley told analysts in July that labor constraints and the need for machine maintenance had weighed down suppliers.
“We see the output of the stress in the supply chain,” he said.
Beyond shortages, the automaker is also grappling with higher supplier costs due to inflation. Ford expects supplier costs in the third quarter to be $1 billion more than expected based on recent negotiations, according to its Monday release.
Ford has been signing supplier agreements around the world to bolster its electric vehicle battery raw material supply and to scale EV development. Other automakers including Toyota and Tesla have also diversified their sourcing pools.
Some competitors have gone a step further to work with suppliers, offering them more flexible terms or investing in their operations in the hopes of securing parts. General Motors CFO Paul Jacobson said during a Q2 earnings call that the company was “willing to invest and prepay and just be very flexible as it relates to the suppliers,” and is focusing on joint partnerships to grow supply.
“These aren’t just contracts that we’re looking to say, ‘give me this volume of material,’” Jacobson said. “It’s about helping our suppliers.”
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