Semiconductor shortage to extend well into 2022, US carmakers predict

By AFP Time of article published Oct 28, 2021

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Detroit - General Motors and Ford reported lower profits on Wednesday as a global semiconductor crunch dented sales, prompting both US auto giants to caution that shortages would persist into 2022.

GM suffered significant sales declines across its markets including the United States and China, the result of depleted inventories due to the chip shortage that obliged plants to suspend manufacturing.

"The quarter was challenging due to continuing semiconductor pressures," GM chief Mary Barra said in a letter to shareholders.

Ford also reported lower profits, but revenues fell more modestly and the company pointed to a "significant" improvement in semiconductor availability in the latest quarter

Chip availability "markedly improved" from the prior quarter, even as supply "remains a challenge," Ford said in their earnings release.

"We see it continuing into 2022," Ford Chief Financial Officer John Lawler said on an analyst conference call, adding that the problem could persist into 2023.

Rethinking inventories

At GM, profits fell 41 percent following a 24 percent drop in revenues amid a broad-based shortfall in sales in all markets and across models.

Still, profits topped analyst expectations, in large part because of strong vehicle pricing due to limited inventories. US dealer inventories are currently less than a third of their year-ago levels.

The semiconductor travails were exacerbated recently by outages at one of GM's chip suppliers in Malaysia caused by an outbreak of the Delta variant of Covid-19.

Barra said the company has seen "some improvement" in semiconductor availability, with more expected in the first quarter of 2022, although the situation "continues to be somewhat volatile."

In the first half of 2022, "We'll still see impact from the semiconductor shortage," she said, but "we think it will get better towards the end of the year."

Car inventories are also expected to stay lean into 2022, but will rebuild over the medium-term.

"We're meant to have more inventory," said Chief Financial Officer Paul Jacobson. "When customers want to buy a vehicle, they want to buy a vehicle. They don't want to wait."

But GM is rethinking its approach to inventories in light of the strong pricing of the pandemic.

"The right answer is certainly a lot more than what we have today but certainly quite a bit less than what we've carried historically," Jacobson said.

Agence France-Presse

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