Ford Motor Co. has hired a second supplier to provide steel frames for its best-selling F-150 truck, hoping to better meet delivery demands amid a parts shortage from its current supplier, according to people familiar with the matter. The Dearborn, Mich., auto maker is struggling to get as many F-150s on dealer lots as originally planned because its supplier, Mexico-based Metalsa SA, is having trouble building enough frames to keep pace with production needs, according to the people. The frame shortage has been going on for months and continues to stifle production at Ford's two pickup plants at a time when light-truck demandjuiced by low gas pricesis running at a 10-year high. To fill the gap, Ford has tapped Livonia, Mich.-based supplier Tower International Inc. to build the additional frames, which are expected to become available in October, people familiar with the plans say. Meanwhile, the auto maker has been shipping frames to its factories by truck rather than rail to get them there faster but at a higher cost, these people say. With not enough frames, Ford has had to cancel planned overtime, and at times, temporarily halt the assembly line during regular shift work as plant employees wait for more frame deliveries to arrive, the people say. In a statement, Ford said it anticipates having full availability of the F-150 by the end of the third quarter. "We are at full production now, we are building stock at dealers and we continue to roll out additional" configurations, the company said. "As with all vehicle launches, we are working closely with our suppliers to meet customer demand for the truck." A Tower spokesman declined to comment but public filings show the parts supplier currently makes body structures for the F-series truck. Tower also builds frames for Ford's Econoline van at its plant in Bellevue, Ohioa facility that is currently undergoing a major expansion. Put on sale in late 2014 as a lighter, more fuel-efficient offering, the relatively long transition period it has taken to move from steel bodies to aluminum has been closely watched by Wall Street because the F-150 drives a substantial share of Ford's profit. As Ford has worked to ramp up F-150 production, the tight inventories on the truck have dented market share and clipped earnings, providing a dose of momentum for rivals General Motors Co. and Fiat Chrysler Automobiles NV. Ford's F-150 has been the industry's best seller since the 1970s. Long built with steel panels, the auto maker shifted to aluminum for a redesigned 2015 version. It was a risky and costly move aimed at lightening the vehicle significantly so it can meet stringent U.S. emissions standards. The vehicle's frame is steel, the industry standard for trucks. The F-150 is built at factories in Dearborn, Mich., and Kansas City, Mo.; a heavier duty version of the F-series built in Louisville will move to aluminum body panels starting next year. Aluminum presents its own manufacturing challenges for auto makers because it is more expensive than steel and more difficult to stamp. But in this case, it is the steel frame that is causing the headache. The F-150's steel frame was re-engineered for the 2015 makeover, and is about 60 pounds lighter than the old one. It has a higher percentage of high-strength steel and is built with a new process that varies the thickness of the metal used to reduce weight. Still unclear is what exactly at Metalsa is causing the shortage. Metalsa officials couldn't be reached. The frames are built by Metalsa at a factory in Elizabethtown, Ky.about 400 miles south of Detroit and 530 miles east of Kansas City. The shortage has become so acute that Ford has sent a team of "fixers" from advisory firm KPMG to Metalsa's factory in Kentucky to ensure smoother operations, people familiar with the move say. Despite the complications, Ford continues to churn out profits in North America, reporting a record quarterly profit of $2.6 billion for the region last month, as the popularity of its new models has helped boost pricing and lower discounts across the lineup. The company is banking on healthier truck supplies to supercharge earnings in the second half of the year with the company targeting operating margins of 8.5% to 9.5%.

• What are the relevant costs for Ford as they decide whether to expand or cut back production?
  • Is labor a relevant cost? Are hourly and unionized workers equally relevant? (Hint: Which cost is more likely to change as Ford scales production up or down?)
  • Would the lease or debt payment on the land where a production facility sits be relevant to the decision about scaling up/back production at that facility in the next month? Why or why not?
  • Why would certain components of costslabor, materials, transportation, and othersbecome higher per car produced as Ford scaled up and lower as Ford scaled back? Do you see any evidence of those phenomena in the articles?