Link: https://www.freep.com/story/money/c...ble-tops-coronavirus-china-supply/3842463001/
Analyst: Ford Bronco supply chain problem points to removable tops
December 7, 2020
A lot happened within eight hours.
Just after 8 a.m. Friday, a top executive at Ford Motor Company did a presentation at the Goldman Sachs Global Automotive Conference to analysts who play a key role in shaping Wall Street opinion of stock value.
"The Bronco is on track to launch in the spring," said Hau Thai-Tang, Ford chief product platform and operations officer, who has long overseen product design, engineering and development, as well as purchasing operations.
But by the end of Friday, after the close of the stock market, Ford revealed plans to delay customer deliveries due to supply chain disruption caused by COVID-19. And the stock price took a slight dip.
The company declined to name what in the supply chain broke down, confidentiality that is not unusual for manufacturers. They guard their relationships carefully.
While Ford dealers and Bronco customers seemed to shrug-off the news as another 2020 disappointment, the situation carries with it a different level of anxiety for an industry shuttered for eight weeks last spring that cost companies billions.
Factories in North America, Europe and Asia all closed as COVID-19 surged in March.
Now this.
"We shared the update on the Bronco two- and four-door customer deliveries being retimed to summer due to a COVID-related supplier issue as soon as it was finalized," Mark Truby, chief communications officer, told the Free Press. "Production on these models begins in the spring, and we expect to start customer deliveries in the summer."
Thai-Tang was monitoring the situation in the days leading up to the Goldman Sachs presentation and in the hours afterward.
"The issue was pretty fluid until we finalized it on Friday," Truby said.
The Free Press has learned that the hiccup involves the removable tops being made for the vehicles, which are assembled at the Michigan Assembly Plant in Wayne.
Joe McCabe, CEO of AutoForecast Solutions based in Chester Springs, Pennsylvania, said the industry is monitoring closely the overall potential impact of the pandemic as well as the short-term impact on Ford with this high-profile product.
His network of supplier contacts pointed to tops made outside the U.S. as the Bronco culprit. And figuring a leak could happen, Ford decided to manage expectations.
"Late March is the true start of production of the Bronco as of right now," McCabe said. "To date, they've built a handful since September for testing and marketing."
He explained, "What's holding up delivery is the tops. There are multiple facilities globally where they're sourced. So, Ford was playing with the idea of delivering the Bronco without a top to the dealer. From the Ford perspective, the entire Bronco can be built without a top. You don't necessarily have to change the production schedule."
The popular SUV, is making a comeback for the first time in 24 years.
Bronco tops — hard or soft — are removable, McCabe said. "They can build the vehicles on schedule. And if the supplier miraculously finds a way to bring tops up to speed, they don't have to change the production schedule at all."
In theory, dealers could let the vehicles sit until tops arrived. No one has to stop building anything or disrupt the schedule, McCabe said. "It's not like missing the steering wheel or the instrument panel, which leaves you sort of screwed."
A second source close to the company confirmed tops are the issue and indicated the problem may belinked to the coronavirus in China. The source requested anonymity because there was no authorization to release the information.
In February 2019, a labor strike in Mexico led to steering wheel shortages for Mustang and Explorer. Companies source parts in the U.S. when possible but the industry has consolidated supplies worldwide to save costs for manufacturers and consumers as well as increase efficiency.
So, Thai-Tang not disclosing the supplier issue to industry analysts may have reflected a belief then that the company might be able to manage the disruption; Bronco enthusiasts would still design their vehicles online on schedule and place orders.
An estimated 150,000 reservations poured into Ford just two weeks after the big Bronco reveal last summer, then-Chief Operating Officer Jim Farley said during an earnings call July 30. By mid-August, the company updated its reservation total to more than 165,000.
The company has declined to update the Bronco figures since then.
The price for the two-door 2021 Bronco begins at $29,995 for the base model, including destination fees. The four-door base model is $34,695 including fees.
Response has been overwhelming. Potential buyers who have gone online to ford.com and placed a reservation with a $100 refundable payment are the only people who may have access to the vehicles when they start getting delivered. While Ford will do its best to fill as many orders as possible in 2021, some customers were likely to get them in 2022 already.
"They'll probably get over 100,000 preordered and have their pipeline of customers established," McCabe said. "Those buyers will already have put their money down. Whether delivery is in April or May or June, that's a nuance."
Charles Elson, a professor of corporate governance at the University of Delaware, said Ford found itself in an awkward situation between the Goldman Sachs presentation and the public announcement.
"No one likes to find themselves in a position where a statement made in the morning is corrected in the afternoon. Period," Elson said. "People who listen to you the next time may have that In the back of their minds. That’s why things are usually carefully scripted to avoid any issue."
Meanwhile, Bronco public discussion forums have begun speculating whether the tops are the issue and potential solutions.
An exchange on Bronco6g.com included a comment from "Mike" in upstate New York posted immediately after the company acknowledged the delay on Dec. 4: "If top production is causing the delay, Ford can build my Bronco first and ship it topless. I’ll worry about getting the top when winter comes."
Agree! Give us a soft top on the 2D. Make it part of the "rewards" program. I'll pick the lid up at the dealer when it comes it. STOP DELAYING. CREATE SOLUTIONS. The average buyer didnt have a new car when they decided to wait for the Bronco. I'm facing having to buy something else out of necessity. That will take me out of the market for a good 5 years.I don't like soft tops, but if they offered one for a 2 door, I'd go that route until they shipped me my MIC, or go topless. Make it happen Ford. I'll sign a waiver if that's what it takes.
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