According to CNN Money, Ford may be resuming the production of its F-150 truck in another week. The company sent out a message to its employees that they should plan to return to work at the Dearborn, Michigan as well as the Kansas City, Missouri plants by May 18. The company had been forced to stop production at these two plants due to a shortage of parts. This happened because a supplier’s facility caught fire and therefore could not deliver on parts.
On May 2, there was an explosion and a fire at the Meridian Magnesium Products factory in Eaton Rapids which has caused major disruptions in the US Automotive sector. The reasons for the explosion and fire are still unknown, however, the matter is being investigated.
Meridian Magnesium Products is the world’s largest supplier of special magnesium die-cast products and is a unit of the Chinese company, Wanfeng Auto Holdings Group Co. Ltd.
According to the Detroit News, Ford is not the only auto company to be impacted by the stoppage of supplies from Meridian Magnesium Products. General Motors Co., Fiat Chrysler Automobiles NV, BMW as well as Mercedes-Benz have had to either halt or adjust production on their vehicles as a result of this incident.
GM has temporarily halted the production of its full-sized vans, the GMC Savana and the Chevrolet Express. Chrysler’s Pacifica minivan’s production has also been impacted by this fire. BMW’s X5 and X6 vehicles would also face production disruption, said the company. Mercedes-Benz cancelled shifts for production in some areas and also adjusted production hours at its Tuscaloosa, Alabama facility.
However, the challenge is more severe for Ford. According to Hau Thai-Tang, Ford’s EVP for product development and purchasing, about a third of Meridian Magnesium’s Eaton Rapids’ production is used in Ford automobiles. The F-150, Expedition, Explorer, Navigator, Super Duty, MKT and Flex all contain components from this factory.
Additionally, the Kansas City and Dearborn plants are the only two factories that make the company’s best-selling vehicle, the F-150 truck. The F-150 has been the highest selling vehicle by any car maker for more than 4 decades now, and is a major profit generator for Ford.
According to data gathered by Morgan Stanley, the value of that truck is higher than that of the rest of the company. Ford’s truck line, of which the best seller is the F-150, brings in upwards of $40 billion in annual revenue for the company.
The company was forced to close first the Kansas City plant and then then Dearborn plant due to a lack of parts. Ford’s president of global operations, Joe Hinrichs stated that the situation with regard to the reopening of the two facilities is still fluid, however, any impact felt would be short term.
Currently, Ford has about 84 days’ worth of F-150 trucks in dealers’ inventories, so the expectation is that customers and dealers will not get impacted by this temporary closure. The company also stated that it was able to retrieve all its tools as well as dies from the Eaton Rapids facility and that nothing had been damaged.
Ford said that it was working with Meridian to get the plant up and running as soon as possible and was also looking at restarting casting operations at other plants. The company said that this delay was going to affect its second quarter profits. In fact, Consumer Edge Research analyst, James Albertine, these shutdowns are going to cost Ford as many as 15,000 trucks’ production per week.
Despite that Ford kept its full year guidance the same.