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Ford (F) Halts F-150 Lightning Production, Plans to Cut Jobs

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Ford (F - Free Report) expects to resume the production of the F-150 Lightning by the end of next week. The auto giant has stalled the production of its mainstream electric pickup truck after encountering a potential battery issue that caused a vehicle fire on Feb 4.

Ford’s spokesperson Bergg confirmed on Tuesday that the stop-shipment and pause in production orders were issued for F-150 Lightning at the beginning of last week. She, however, declined to disclose any details regarding the same. On the next day, the automaker said that it believes the engineers may have detected the cause of fire that led to the production suspension. Currently, the investigation is in progress and is expected to be completed by the end of the next week. The adjustment to the truck’s battery production, which requires another few weeks, will take place post-investigation.

According to Ford, during a pre-delivery quality check, the holding lot caught fire, which got spread to a nearby vehicle. So far, no incident of catching fire has been observed in vehicle that already reached dealers and consumers. There is no stop-sale order on vehicles that have already reached the retailers. The dealers may keep selling the stock they have on hand.

The news added to the woes of ongoing “execution issues” put forward by CEO Jim Farley during the latest earnings call. For FY2022, Ford fell short of its own full-year guidance due to “execution issues” that plagued its operation. Ford is struggling to become more profitable than its old competitors because of a cost disadvantage of $7 billion - $8 billion.

Investors have been closely following the progress on F-150 Lightning since it is Ford’s first mainstream electric pickup truck and a major element in deciding the trajectory of the business going forward.

Historically, automakers have faced issues related to the production of vehicles, but battery-related matters are jarring, taking into consideration the amount of investment involved. A couple of years ago, the legacy automaker, General Motors’ Chevrolet, had to recall all the electric vehicles because of the fire caused by “rare manufacturing defects” at LG Battery Solution’s plants in Michigan and South Korea.

Over and above that, the company intends to lay off 3,800 out of 34,000 employees in Europe in the next three years. The job cuts will only affect the production, development and administration departments. The auto manufacturer will sack 2,300 employees in Germany, 1,300 employees in the United Kingdom and 200 employees in the rest of Europe. On the other hand, Ford will retain around 3,400 engineers in Europe. The layoffs will not hold back Ford from reaching the target of an all-electric fleet by 2035. In fact, the production of European electric passenger vehicles is expected to start by the end of the year.

While speaking about the job cuts, Martin Sander, GM Passenger Vehicles, Ford of Europe, said, “Paving the way to a sustainably profitable future for Ford in Europe requires broad-based actions and changes in the way we develop, build, and sell Ford vehicles. This will impact the organizational structure, talent, and skills we will need in the future.”

Zacks Rank & Key Picks

F currently carries a Zacks Rank #3 (Hold).

A few top-ranked players in the auto space are Mercedes-Benz Group AG (MBGAF - Free Report) , Wabash National (WNC - Free Report) and Modine Manufacturing (MOD - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).

Mercedes-Benz develops, manufactures and sells passenger cars, including premium and luxury vehicles. The Zacks Consensus Estimate for MBGAF’s 2023 sales implies year-over-year growth of 3.57%.

Wabash is one of the leading manufacturers of semi-trailers in North America. The Zacks Consensus Estimate for WNC’s 2023 sales and earnings implies year-over-year growth of 13.06% and 24%, respectively.

Modine operates primarily in a single industry consisting of the manufacture and sale of heat transfer equipment. The Zacks Consensus Estimate for MOD’s 2023 sales and earnings implies year-over-year growth of 11.43% and 43.09%, respectively.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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