IG news Update,
The still-shut down global supply chain is wreaking havoc on the auto industry.
Ford said on Monday that it would end September with between 40,000 and 45,000 larger pickups and SUVs because it doesn’t have all the parts.
Negotiations over various supplies, which Ford did not identify, are driving up its cost. The company warned late Monday that shortages and rising prices of supply This will cost an additional US$1 billion in the quarter. Ford shares fell 5 per cent in premarket trading on Tuesday.
The unfinished vehicle problem should be a temporary setback: Although many unfinished vehicles are highly profitable for the company, Ford said it should be able to meet its full-year earnings target. That’s because Ford plans to shift sales revenue from nearly complete vehicles into the fourth quarter.
Automakers have been grappling with various supply chain issues, most notably a shortage of computer chips, which have stalled vehicle production over the past two years.
This isn’t the first time that Ford has built most vehicles, but not with all of its computer chips. In March, the company announced that it would ship some SUVs without some of their low-key chips and then add them later as they are sold to customers. At times, chip shortages have forced some plants to temporarily shut down completely.
Shortage of vehicles coupled with strong consumer demand has driven vehicle prices to record highs. Most of the windfall gains from higher prices are going to car dealerships
, – which are independent businesses – rather than automakers, because most buyers are now paying more than the manufacturer’s suggested retail price, or sticker price. For decades it has been common for customers to pay less than the sticker price.
Ford and other automakers keep speculating that supply problems will improve. In July, CFO John Lawler told investors that the company expected to see “growth”. [in] Volume through the second half of the year, as some chip barriers ease.”
It’s not just automakers dealing with supply chain problems and shortages.
In a survey of members released Monday by the National Association of Manufacturers, 78% said supply chain disruptions are their primary business challenge, with only 11% now confident there will be improvement by the end of the year.
The survey also found that 76 percent cited high raw material costs, such as those that Ford highlighted, as a problem, with 40 percent saying inflation pressures are worse today than they were six months ago. At the same time, 76 percent said that they are finding it difficult to work according to their needs.
There is also growing concern that the US economy could soon slip into recession, with most manufacturers expecting a recession later this year or in 2023.
“Three out of four manufacturers still have a positive outlook for their businesses, but optimism has certainly declined,” said Jay Timmons, NAM CEO.