Ford to restructure supply chain after $1 billion in unexpected costs

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Ford CEO Jim Farley at the company's Dearborn, Michigan, plant where it's building the electric F-150 Lightning on April 26, 2022.

CNBC | Michael Wayland

DETROIT – Ford Motor on Thursday announced plans to restructure its global supply chain, days after the company said it expects to book an extra $1 billion in unexpected supplier costs during the third quarter.

The supply chain restructuring aims to “support efficient and reliable sourcing of components, internal development of key technologies and capabilities, and world-class cost and quality execution,” the automaker said in a release.

The effort will be led on an interim basis by Ford Chief Financial Officer John Lawler until the company selects someone to fill the newly created chief supply chain officer position.

Lawler is stepping in at a time when parts and raw material costs for automakers and suppliers have been soaring during the coronavirus pandemic. The increases have occurred amid severe supply chain problems, including an ongoing global shortage of crucial semiconductor chips.

On Monday, Ford said recent negotiations resulted in inflation-related supplier costs running $1 billion higher than previously expected during the third quarter. The announcement, including a pre-release of some earnings expectations, caused Ford's stock to have its worst day in more than 11 years.

The restructuring is not directly connected to the automaker's announcement earlier this week, according to Ford spokesman T.R. Reid. He said changes to Ford's supply chain have been underway for some time amid the industry's supply chain problems and its shift to electric vehicles.

“As we've acknowledged before, this is an area we've gotten better, and there's still additional room for improvement,” he said.

Jonathan Jennings, Ford vice president of supply chain, will also take additional responsibility for supplier technical assistance and quality, the company said. He will report to Lawler.

The supply chain plans were announced in addition to further executive changes and appointments involving electric vehicles, product development and other areas of the company.

Ford said the changes are an acceleration of CEO Jim Farley's “Ford+ plan for growth and value creation.”



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