By on October 25, 2021

GM

Ford and General Motors are both slated to show their third-quarter earnings reports on Thursday.

Reports suggest that despite the negative impacts of the global semiconductor chip shortage, there may be positives for the companies, as well.

Both companies have, of course, had to halt production at times to deal with the chip shortage. And supplies, materials, and shipping have higher costs now, which could also prove problematic for profit margins.

On the other hand, strong demand for profitable trucks and SUVs has been more than helpful.

According to Automotive News, this means investors will be wondering how both companies can navigate a turbulent supply chain.

The annual sales rate for new cars and trucks dropped to 12 million in September, thanks to the chip shortage, and forecasters are cutting their forecasts for 2022 thanks to the shortage and general supply-chain disruption. Much depends on if the chip shortage ends in 2022 or 2023.

Wells Fargo is expecting the two companies will tell investors to focus more on the lower end of their forecasts for the year.

That’s not shocking — the industry is facing a lot of headwinds right now, and Ford and GM aren’t exempt.

[Image: GM]

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27 Comments on “Ford, GM Earnings Reports Will Tell the Chip Shortage Tale...”


  • avatar
    redapple

    Just drove by my local mega chevy dealer. He had 8 uglyasssilverados and 6 mid sized CUV.

    Thats it. I wonder if stealers were able to maintain profitability.

    • 0 avatar
      FreedMike

      I’m going to go with fewer of those freakshow Silverados on the road being a real good thing.

    • 0 avatar
      Scoutdude

      Well they aren’t having to do the discounts so that improves unit margin.

      On the other side of the equation inventory on display isn’t necessarily directly tied to sales. More vehicles are being ordered to customer spec and even the stock orders for popular vehicles are often sold before the transporter hits the lot. So many vehicles aren’t going on display.

      The other bonus for dealers is that with so few vehicles on display and so many going directly to the customer floor plan costs are way down further improving unit margins.

      Then you have the real profit centers for dealerships, used car sales and the service dept.

      Used like new is seeing higher margins and quicker turns to help offset lower sales.

      The service dept on the other hand is up across the board as people are choosing to stay out of the market and spending more money on their existing car to keep it longer.

      • 0 avatar
        Lou_BC

        @Scoutdude – I’ve seen dealers advertise ordering units for customers but with that being said, I don’t see many vehicles occupying the lot at my Chevy dealer. The part of the lot that is typically reserved for sold units is pretty empty too. I see mostly fleet white pickups at that end. I drive by almost every day.

  • avatar
    ToolGuy

    These guys are killing it. (The planet, I mean.)

    https://www.fueleconomy.gov/feg/bymake/Buick2021.shtml

    https://www.fueleconomy.gov/feg/bymake/Cadillac2021.shtml

    https://www.fueleconomy.gov/feg/bymake/Chevrolet2021.shtml

    https://www.fueleconomy.gov/feg/bymake/GMC2021.shtml

    https://www.fueleconomy.gov/feg/bymake/Ford2021.shtml

    https://www.fueleconomy.gov/feg/bymake/Lincoln2021.shtml

  • avatar
    Jeff S

    GM and Ford should make record profits with no incentive money offered and the dealers should make money with many of them charging well above MSRP. Many customers will remember the dealer price gouging in the future. With higher gas prices and the escalating prices of trucks and suvs it might be a good time for buyers to re-evaluate whether they really need a truck or suv. Maybe it is better to buy just what you need and no more.

  • avatar

    Why not to go to Toyota dealership and buy mobility contraption there for fair price?

  • avatar
    Jeff S

    If you can find a mobility contraption on Toyota’s lot.

  • avatar
    28-Cars-Later

    “The annual sales rate for new cars and trucks dropped to 12 million in September, thanks to the chip shortage, and forecasters are cutting their forecasts for 2022 thanks to the shortage and general supply-chain disruption. Much depends on if the chip shortage ends in 2022 or 2023.”

    The last time sales were 12 million units was around 2011/12, that’s the progress that’s been made! But fret not, the static EV sales now will have greater market share amidst a 1/3rd reduction of the market. Didn’t I say this last year? Oh that’s right, I did :) Look for the Propaganda Ministry to pounce on this at some point, but as usual smoke and mirrors.

    Oh and I also seem to recall saying if the “chip shortage” didn’t somewhat resolve itself by the fall -a bit over a year in- it was least partially artificial and would run until the next presidential election cycle (perhaps earlier in 2024 so the junta could take a victory lap months in advance of the [s]election). In all seriousness though, if you reading this and are one of the 20-35% who support the selected DC junta you are supporting these shortages – you are part of the problem – because they are partially or completely artificial at this point (this is not to suggest reasonable people with some Leftist views are included in this group, because reasonable people have open minds desiring peace and prosperity).

    “Total 2019 full-year sales of 17,047,725 units were down 1.3% from 2018 year-end totals.”

    https://www.marklines.com/en/statistics/flash_sales/salesfig_usa_2019

    Oh and Let’s Go Brandon!

    • 0 avatar
      DrivenToMadness

      I’m in the automotive semiconductor business and I can assure you the supply problem is NOT artificial. If you could understand the enormous capital expenditure and how much engineering is required to manufacture them, you would understand why the supply is so inflexible, made worse by the real constraints in the physical supply chain of moving raw materials around many countries in the ecosystem, in a pandemic.

      • 0 avatar
        28-Cars-Later

        “If you could understand the enormous capital expenditure and how much engineering is required to manufacture them, you would understand why the supply is so inflexible”

        Point taken.

        “made worse by the real constraints in the physical supply chain”

        Some of which are artificial. Unions/union rules, gov’t/gov’t rules, port access, looming threats on ROC (Taiwan), suppliers taking selected contracts but not others. Then there is this gem:

        “Deputy Treasury Secretary Wally Adeyemo may have accidentally leaked the cause of America’s supply chain issues. “The reality is the only way we’re going to get to a place where we work through this transition is if everyone in America and everyone around the world gets vaccinated,” Adeyemo admitted in an interview with ABC News.”

        https://www.armstrongeconomics.com/international-news/north_america/are-the-us-supply-chain-disruptions-deliberate/

        Right, so *Treasury* Secy Yellen’s immediate subordinate either through a Freudian slip or made to look as such postulates its on the proles to take injections or we stay in limbo.

        Few things:

        1. The US Treasury Dept. has nothing to do with public health nor does
        it’s members have any medical training.

        2. Um praytell what “transition” is that Mr. Deputy Secy? The only one you’re qualified to know about would be a financial one. Are you working on a significant financial transition and if so what does that have to do with an ostensible health crisis of which you are not qualified to comment on?

        3. So Mr. Deputy Secy were you promoted to oversee the Treasury of the planet Earth or just the United States? What basis do you have to comment on the actions of other countries, especially when these comments are NOT pertaining to finance or currency.

        Tell me again how none of this is artificial.

        “in a pandemic”

        Long over, sir.

  • avatar
    el scotto

    Which business traveler hotel chain will be the 1st to put in chargers and advertise that fact? All of the MarWesHolHyaHil and their chain affiliates have the same basic amenities. At 0600 I’ll be doing three things I excel at: drinking coffee, smoking, and bitching. Now to make sure the car is charged.

  • avatar
    Jeff S

    @DrivenToMadness–Since you are in the automotive semiconductor business can you clarify if one of the reasons for the chip shortage in the auto industry is that the auto industry is using less profitable and outdated semiconductor chips. Is this true and if so why haven’t the auto makers updated to the newer generation of semiconductor chips which are undoubtedly more expensive but if it is a problem why not update and pass the cost along? Would like to have the straight facts.

    • 0 avatar
      DrivenToMadness

      The answer is a little more nuanced than that. Auto-qualified semiconductor chips are manufactured on “more mature” technologies that are not bleeding edge, but rightfully so. An iPhone isn’t expected to operate for 10 years, 100,000 hours at an ambient temperature exceeding 105 degrees C, but electronics in a car are. An iPhone is obsolete in 2 years but nowadays people are taking out 84-month loans for new cars. An iPhone that hangs more than twice is just reset a third time, but you and I would make a trip to the dealer if that big display in our fancy new car hung more than once.

      But, the world buys a billion smart phones a year and hundreds of millions of laptops, tablets, and Amazon Alexa devices, but only roughly 80 million new cars a year, and a year ago nobody could’ve predicted car sales were going to rebound so strongly in a pandemic when a car is typically the second most expensive household item (mortgage/rent being the most expensive). So, by the time carmakers reacted to the market needs, we’re all finding out how inflexible the semiconductor supply chain is, when the supply chain was geared to supply those billions of units of WFH personal electronics.

      Carmakers ARE buying the latest and greatest semiconductor products because that’s how they sell cars: with ever bigger central displays, fully graphical instrument clusters with resolutions that would shame the best TVs at Costco from just 5 years ago, dazzling LED headlights that can animate to “welcome” the driver, and ADAS features that, in my opinion, do help make our roads safer from the a-holes who MUST look at their FB feeds every other second.

      And the carmakers ARE now passing on the costs to us. Like I said, the problem is very real, but personally I want the carmakers to insist on using only auto-qualified semiconductors that literally need to be something like 200 times more reliable than a chip that goes into a typical Bluetooth speaker or any other throw-away gadget that’s obsoleted every year.

  • avatar
    Shockrave Flash Has Crashed

    Tesla’s cars seem to hold their value, and it will give people who would not have been exposed to electrics a low risk way to drive one. They are both getting huge publicly from the deal. They are expensive to buy, but cheap to own. This seems like huge win for everyone.

  • avatar
    ToolGuy

    The blue and pink racks in the picture: Is someone doing a subtle gender reveal at the stamping plant?

    https://www.refinery29.com/en-us/2021/02/10304983/gender-reveal-parties-dangerous-end-argument

  • avatar
    Jeff S

    @DrivenToMadness–Thanks for the information after reading some of the reports basically said that the car manufacturers were to cheap to upgrade to the next generation microchips. I suspected there might be more to the story than that so thanks for the additional information.

    • 0 avatar
      DrivenToMadness

      Carmakers ARE cheap, and you’ll be surprised how even the top luxury name plates will literally nickel and dime components, but auto-qualified semi components are supplied by just a few very specialized suppliers and they all got caught off guard, and it takes BILLIONS of capital expenditure and YEARS of engineering to add capacity—like what you read in the news.

      • 0 avatar
        Lou_BC

        I saw a show on making the Mustang. A head engineer did a good job of explaining cost controls. A nickel saved on a “shared” component going into 10’s of millions of vehicles adds up.

  • avatar
    Jeff S

    Don’t mind shared components but when a critical part is made out of plastic instead of metal it becomes an issue.

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