Top Auto Company Loses BIG After Betting On The Future
(RepublicanNews.org) – The pandemic has impacted all businesses regardless of their size or influence. It became a boon for people in the healthcare industry, who had to quickly ramp up services in response. Yet, for others, the pandemic’s side effects strained their ability to manufacture and ship out products. Even Ford, an automotive industry giant, is dealing with far-reaching problems — including massive losses.
When the Chips Are Down
Ford told CBS it lost around $3.1 billion in revenue over the past 90 days, citing chip shortages and bad investments. However, CFO John Lawler attempted to divert attention from Ford’s losses by claiming it also made around $2.3 billion in profit before taxes.
The shortage of semiconductors apparently hindered Ford’s ability to manufacture sport utility vehicles (SUVs) and large pick-up trucks. Semiconductors are tiny computers that essentially act as brains for modern-day cars and all the electronic systems they contain: heated seats, power windows, engine temperature sensors and more. Without them, it’s also impossible to add in critical safety features.
Like most shortages, the lack of semiconductors ultimately links to side effects of the COVID-19 pandemic, mandates, and restrictions. From employees not being present to an increased demand for electronics and even the fact that more people than ever are now working from home, chip demand has skyrocketed. That situation leaves vehicle manufacturers with access to an increasingly limited supply.
General Motors is also suffering because of the semiconductor shortage. It had to shut down production in several North American locations completely in response.
A Bad Investment?
Bad investments don’t only hurt the little guy; large companies such as Ford can also feel pain after making bad financial decisions. While Ford’s choice to invest in electric vehicle (EV) startup Rivian may pay off in the long run, the company’s stock recently nosedived in price.
Ford’s share prices plummeted as a result of the EV manufacturer increasing the prices of several key models: the R1T, an electric pick-up, and the R1S, an electric SUV. People who pre-ordered were understandably unhappy — some enough to cancel their order entirely.
CBS News also noted that Wedbush Securities equity analyst Daniel Ives said Rivian hasn’t lived up to its hype or potential. Ives apparently mentioned Rivian could still become a formidable EV manufacturer someday, adding that it needs to start getting vehicles out the door and to customers before that happens.
Like the rest of America, Ford is struggling under the weight of increasing inflation. The company claims higher vehicle prices make up for the gap — at least for now.
Lawler told the news outlet he couldn’t guarantee further price hikes won’t come, mainly because inflation causes an increase in the price of manufacturing already expensive electric cars. That’s likely why Rivian decided to increase their price, even if they did backtrack on the decision.
Going green is expensive. Fossil fuel-powered vehicles can still be made without semiconductors. Can electric cars say the same?
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