Four of the world’s major carmakers are confident their renewable ambitions remain on track despite being whacked hard by the shortage of computer chips in September, a situation some say could last for another year or more.
Between them, Ford, General Motors, Stellantis and Volkswagen have plans to spend more than $US160 billion in the next decade or so on electric vehicles, new plants to build them, retraining of staff, battery plants, recycling businesses and in the case of GM, a massive chain of recharging stations across North America.
Volkswagen, Stellantis and General Motors were worst hit and Ford, while suffering, actually seems to have emerged with more optimism for the immediate future.
Together the four have lost upwards of 2 million sales so far this year with a couple hundred thousand or more this current quarter to come. These are sales forgone because while the demand is there, the supply hasn’t been.
General Motors kept the focus on renewables with an announcement on Tuesday that would install up to 40,000 electric-vehicle charging stations in the United States and Canada.
The announcement came a few months after GM said it had signed agreements with some companies to offer its customers access to nearly 60,000 charging points across the same regions of the US and Canada.
Those recharging points (most of which will be available to cars made by all companies) will require lots of computer chips, so GM and its rivals will be punting on the current shortage being overcome quickly.
The shortage of chips dominated the results from all three companies, but what also showed up – especially in the case of GM and Ford – is easy the companies found to recover the higher costs in price rises.
The Edmunds.com auto data group reckons the cost of the average Ford car rose 13% to $US51,000 in the quarter and that of GM was up 16% to just over $50,000.
The rising costs (and popularity of big Sports Utility Vehicles and the continuing demand for pickups (especially the Ford F-150) helped fill holes in weak sales and earnings pictures.
Those rises were three times US consumer price inflation and helped keep the companies nicely profitable.
Ford and GM expect their supply-chain disruptions to slowly improve in the fourth quarter and throughout next year, although strong car demand will make it difficult to rebuild stocks for the next year at least.
Ford sold fewer cars and saw a 23% drop in net profit to $US1.83 billion, while GM’s profit dropped 40% to $US2.4 billion.
Ford in fact is now so upbeat that it will resume paying a dividend, 10 cents a share, starting in the fourth quarter.
Ford’s sales fell 27% in the quarter in the US, its core market. It lost 2.4 percentage points of US market share, largely because like GM, it couldn’t produce enough vehicles to meet demand.
Chief Financial Officer John Lawler said told an analyst briefing that Ford has the cash and income to invest in electric vehicles and services. He said the company is confident in the trajectory of its business.
“That’s providing us the financial flexibility to fully fund our plan and all of our other capital needs,” he said. “We also are focused on total shareholder returns, not only appreciating stock price but also the dividends.”
He said the chip shortage should ease a bit from October through December, and sales to dealers should rise 10% this quarter over the previous one. While supplies will improve, the shortage will continue into next year and possibly into 2023, he added.
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GM’s earnings fell from $US4 billion last year as sales slumped and the company also lost market share in the the core US market.
GM saw a 25% slide in revenue for the quarter to $US26.78 billion.
GM CEO Mary Barra blamed the fall in sales and earnings on the global shortage of semiconductors, plus COVID outbreaks at supplier factories, hit the company during the third quarter. “It still continues to be somewhat volatile,” she said.
However, GM is seeing improvement in the current quarter and expects additional supplies in the first three months of 2022.
GM has said it expects to produce about 200,000 fewer vehicles in the second half of this year compared with the first half, with most of the impact occurring in the September quarter.
Barra said she’s spoken with the CEOs of most major chip makers, and the companies are working on strategies to make sure the shortages don’t happen again.
GM’s profit came even though US third-quarter sales were almost 33% lower than a year ago. The company lost 3.8 percentage points of U.S. market share, Edmunds said.
But Barra said she expects GM’s market share to bounce back when factories get back to normal production. “We are selling everything we can. I wish we had more vehicles,” she said.
With the expected improvement in chip supplies, GM increased its full-year net income guidance to a range of $US8.1 billion to $US9.6 billion. In the second quarter it had forecast $US7.7 billion to $US9.2 billion for the year.
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For Volkswagen, the world’s Number 2 carmaker, the third quarter was more of the same from earlier in the year.
A lowered outlook for deliveries and sales in coming months, the shortage of computer chips and cost cutting impacted the business and saw VW report lower-than-expected operating profit for the three months.
As a result of the chip shortage, Volkswagen now expects deliveries in 2021 to be only in line with 2020’s 9.3 million units, having previously forecast a rise.
Revenues at Europe’s largest carmaker are now expected to be ‘considerably’ higher this. Volkswagen had previously expected a ‘significant increase’ from the 223 billion euros in 2020. The change in wording indicates the company now sees a weaker pace of growth than before.
“Following a record result in the first half of the year, the semiconductor bottlenecks in the third quarter made it abundantly clear to us that we are not yet resilient enough to fluctuations in capacity utilisation,” VW said in a statement.
“This clearly shows that we must continue to work resolutely on improving our cost structures and productivity in all areas.”
Third-quarter operating profit fell 12% to 2.8 billion euros ($US3.25 billion). The profit margin for the July-September period fell to 4.9% from 5.4% last year.
“The results of the third quarter show once again that we must now systematically drive forward the improvement in productivity in the volume sector,” CEO Herbert Diess said in a statement.
It was a similar story for Volkswagen’s luxury division Porsche AG, which is said to being evaluated for a possible stock market listing. Despite avoiding much of the problems it parent encountered so far this year, Porsche says the fourth-quarter would be challenging with regard to chip supply.
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Stellantis — formed through the merger of Fiat Chrysler and France’s PSA at the start of 2021 — saw the chip shortage cut third quarter sales by 14% as the carmaker cut planned quarterly production by 30%, or 600,000 vehicles. Shipments fell 27% to 1.131 million for the quarter.
That saw net revenues drop 14% to 32.6 billion euros for the world’s 4th largest carmaker down from 37.3 billion a year earlier.
“The level of chip shortage was probably slightly higher than what we had expected when we last spoke to the market in August,” Chief Financial Officer Richard Palmer said, adding that the full-year total of lost production due to the chip shortage would top a previous forecast of 1.4 million units.
But Palmer sees a “moderate” improvement on the chip supply situation this month compared to September and expects the trend to continue through the fourth quarter.
“Visibility on semiconductors continues to be a difficult subject for the industry,” Palmer added.
The company doesn’t issue earnings data with its quarterly reports.
It did however confirm its full-year target for an adjusted operating profit (EBIT) margin of around 10%.
That forecast was raised in August and assumes no further deterioration in semiconductor supply and no further significant lockdowns in Europe or the United States.
The problems and pressures running these giant global companies are hard at the best times, let alone with such a confluence of negative factors. The make running a domestic business in Australia look like a holiday camp, even though many of the problems are shared. It’s just the scale that makes it tougher to handle.
