Stock Groups

GM, Ford results likely to reflect chip shortage’s varying impacts on sector -Breaking

[ad_1]

© Reuters. FILEPHOTO: Ford’s logo is seen at Frankfurt Motor Show (IAA), Frankfurt Germany, 2019. REUTERS/Wolfgang Rattay/File Photo

By Ben Klayman

DETROIT (Reuters) – General Motors Co. (NYSE:) Co and Ford Motor (NYSE NYSE:) Co, will show investors the financial impact of the global shortage in semiconductor chips when U.S. automakers publish their third quarter results on Wednesday.

GM and Ford were forced to suspend some lines of production due to a shortage in semiconductors. Also, they had to contend with rising shipping costs and other components and raw materials. Profit margins are under pressure due to falling production and increasing supply chain costs.

GM and Ford were able to counter this pressure due to high demand for their full-size SUVs and trucks, which allowed them to reduce discounts and still make strong profits.

Investors will pay close attention to the statements of Mary Barra, Ford’s CEO, and Jim Farley (GM) about their ability to protect profit margins from the stormy supply chain.

Both GM, Ford and others have created strategies to generate more revenue through software-powered services. They argue that their companies should be valued as highly as electric carmaker Tesla (NASDAQ) Inc.

However, for now and the next few years, Detroit’s automakers will rely largely on the sale of hardware to make a profit.

The chip shortage https://www.reuters.com/article/chips-shortage-explainer-int-idUSKBN2BN30J has hit sales hard as inventories on dealer lots dry up. In September, U.S. sales of new vehicles fell to just above 12 million units annually. Industry forecaster IHS Markit cut its 2022 light vehicle production forecast by 9.3% or 8.5M vehicles last month, due to disruptions in the supply chain.

Paul Jacobson, GM’s Chief Financial Officer, warned last month that wholesale deliveries for the third quarter could fall by 200,000 units due to chip shortages.

The price rise of steel and other commodities continues unabated. Congested ports and shortages of certain materials, such as magnesium and resin, continue to cause disruptions and increase operating costs.

There have been recent warnings that such suppliers could cause disruptions in the supply chain Magna International (NYSE:), Continental, Autoliv (NYSE:), Aptiv (NYSE:) Plc, Lear ABB Ltd and (NYSE:) Corp suggest that the worst could yet lie ahead.

Several top auto executives, including Mark Reuss, GM President, said that the chip situation will stabilize in next year’s market, albeit at lower than expected levels. However, executives such as Daimler Ola Kallenius (CEO AG: DE:) believes the effect could continue well into 2023.

Wells Fargo (NYSE: ) earlier this month stated that it anticipated GM or Ford to direct investors toward the lower end in their financial forecasts for next year’s report.

Disclaimer Fusion MediaThis website does not provide accurate and current data. CFDs are stocks, indexes or futures. The prices of Forex and CFDs are not supplied by exchanges. They are instead provided by market makers. As such, the prices might not reflect market values and could be incorrect. Fusion Media does not accept any liability for trade losses caused by the data.

Fusion MediaFusion Media or any other person involved in the website will not be held responsible for any loss or damage resulting from reliance on this information, including charts, buy/sell signals, and data. Trading the financial markets is one of most risky investment options. Please make sure you are fully aware about the costs and risks involved.

[ad_2]