Ford (NYSE: F) stock has risen 10%+ in the last five days. It is interesting to note that the company expects to make half of the cars and trucks in Q2 2021, versus its planned levels. The company has an outlook of producing 700K units in the current quarter, which is 50% lower than originally planned production. Ford has already lost around 200K units in Q1 (comprising 17% of the planned production in Q1) and a loss of further 200K units (10% of planned production for the second half of the year) are expected in the second half of the year. Ford will report results of this quarter’s reality in July-August. The stock at around $14 per share, is near its all-time high that it has seen in the last twenty years. Add to that a higher inflation trend, and potential for Fed rate hikes that could weigh on auto financing. When we put this all together, we see Ford’s stock vulnerable in the near term.

Covid-19 is on a decline in the U.S. and much of the developed world. People are driving again, and keen to buy cars. So wait, why should Ford produce less?

It is the global shortage of semiconductor chips. Cars are increasingly becoming like computers on wheels - these semiconductor chips are helping drive innovation in vehicles. They aid vehicle electrification, airbag deployment, accurate mixing of fuel and air in the engine, autonomous driving aids, sensors, cell phone and communication integration.

Ford plans to halt production across eight of its plants in North America during June, for various periods of time. The company expects the chip shortage to lower its earnings by about $2.5 billion in 2021. As per CFO Lawler, the company ended the last quarter with only 44 days of vehicle supply, way below the healthy industry norm of 60 days.

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