GM and Ford have had to halt some assembly lines due to a shortage of semiconductors, and have struggled with rising costs for other parts and raw materials as well as shipping.
see photosGM and Ford have been able to relieve pressure due to strong demand for their trucks and SUVs
Investors in General Motors Co. and Ford Motor Co. are likely to show both positive and negative financial impacts of the global semiconductor chip shortage when the US automaker reports third-quarter results on Wednesday.
GM and Ford have had to halt some assembly lines due to a shortage of semiconductors, and have struggled with rising costs for other parts and raw materials as well as shipping. Lower production and rising supply-chain costs put pressure on profit margins.
However, GM and Ford have been able to relieve that pressure due to strong demand for their attractive full-size trucks and SUVs, which have allowed them to cut discounts and maintain strong profits.
US new vehicle sales in September fell to a slow annual rate of just over 12 million vehicles. photo credit: Reuters
Investors will be listening carefully to what GM and Ford’s respective CEOs, Mary Barra and Jim Farley, say about how long they can protect profits from supply-chain storms.
Both GM and Ford have recently outlined strategies to generate more revenue from software-driven services, arguing that their businesses are more valuable than those of electric car maker Tesla Inc.
But now and for the next several years, Detroit automakers — such as Tesla — will rely primarily on profit from selling hardware.
Chip shortage has hit sales badly as inventory dries up at dealer lots. US new vehicle sales in September fell to an annual rate of just over 12 million vehicles, and industry forecaster IHS Markit last month citing supply-chain disruptions in its 2022 global light vehicle production forecast to 8.5 million vehicles, or cut by 9.3%.
Last month, GM’s chief financial officer Paul Jacobson cautioned that the company’s third-quarter wholesale deliveries could fall below 200,000 vehicles due to chip shortages.
Meanwhile, the prices of steel and other commodities continued to rise. And disruptions to global supply chains, whether from congested ports or shortages of materials such as resin and magnesium, have continued to drive up operating costs and disrupt production schedules.
Recent warnings about supply-chain disruptions from suppliers such as Magna International, Continental, Autoliv, Aptiv plc, Lear Corp and ABB Ltd suggest the worst may still be out there.
Several auto executives, including GM President Mark Rees, have said they see the chip situation stabilizing next year, even if it falls below desired levels. However, some executives such as Daimler AG’s chief executive, Ola Kalenius, think the impact could last well into 2023.
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Wells Fargo said earlier this month that it expects GM and Ford to guide investors to the low end of their financial forecasts for that year when they report.
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