Things are getting interesting in the auto industry.
(ticker: F) and
aren’t at full capacity. And
(STLA), formerly Fiat Chrysler, is building trucks with missing parts. It all sounds bad, but it is exactly what U.S. investors should expect right about now.
The issue at the root of those problems is the global automotive microchip shortage, which has plagued the industry for a few months.
On Saturday, Reuters reported that Stellantis would partially build Dodge Ram pickup trucks and finish them later when chips became available. That wasn’t the only update detailing semiconductor pain. Ford said the same thing about its F-150 trucks on Friday. Ford’s news release says trucks are rolling off assemble lines without “some electronic modules that contain scarce semiconductors.” The trucks go to dealers after parts arrive and the trucks have been checked out.
Ford also announced plant downtime in the U.S. and Germany. Earlier in March, GM announced similar measures at some of its plants.
The shortage is adding billions of dollars in costs and is reducing output, but here’s the thing: All the auto companies said this is what would happen at the start of the year.
GM called the chip shortage a billion-dollar headwind to 2021 operating profit. Ford estimated the chip shortage would hit 2021 operating profit by $1 billion to $2.5 billion. Events of the past few weeks are just the tangible evidence of what investors were warned about a while back.
Investors, for now, believe the shortage will pass. Ford, GM, and Stellantis shares are up about 46%, 44%, and 22% year to date, respectively, far better than comparable gains of the
Investors believe it will pass because the semiconductor industry is working on it. Chip giant
Taiwan Semiconductor Manufacturing
(TSM), for instance, called resolving the automotive chip shortage a “top priority” on its fourth-quarter earnings conference call in January.
Investors will start to become much more concerned if the shortage extends into the third quarter and companies like Ford have to give new guidance. Until then, the news is an exercise in reconciling events with corporate guidance.
Write to Al Root at [email protected]