Ford, GM juggle high prices and supply chain pressure behind Tesla’s shadow – .

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Ford, GM juggle high prices and supply chain pressure behind Tesla’s shadow – .


DETROIT, Oct. 27 (Reuters) – Detroit automakers Ford Motor Co (FN) and General Motors Co (GM.N) have both taken advantage of insatiable U.S. consumer demand for trucks and SUVs to offset the pain caused by the supply chain bottlenecks.

But the two automakers have warned investors that the cost pressures created by disruptions in the global semiconductor supply chain and price spikes in other commodities will continue until next year. .

For Detroit automakers, that means maintaining a complex juggling act: pushing the price envelope on popular vehicles like the Ford F-150 or the Cadillac Escalade while working to stabilize semiconductor flows. and by controlling the costs of raw materials, from steel to aluminum to magnesium.

How far prices can go up is a key question. The average GM vehicle sold for over $ 47,000 in the third quarter. Ford increased the prices of vehicles sold in North America by almost $ 3,500 each, on average. Both companies said higher prices offset rising raw material costs in the quarter.

Results reported by Ford and GM on Wednesday show that managing supply chain pressure will not be easy and that investors are watching companies closely and critically.

GM shares fell 5.2% on Wednesday, although the company said its operating profits for the year 2021 would be at the high end of a range of $ 11.5 billion to $ 13.5 billion. dollars.

Detroit’s two once-dominant automakers are now eclipsed by electric vehicle maker Tesla Inc (TSLA.O), which last week reported higher profit margins and reached a market cap of $ 1,000 billion earlier this week. of dollars, more than its five major rival automakers combined. . Read more

While relying almost entirely for now on profits from oil-powered trucks, executives at GM and Ford have expressed ambitions to challenge Tesla in the electric vehicle market.

GM chief executive Mary Barra told CNBC the company could “absolutely” catch Tesla in electric vehicle sales in the United States by 2025. Ford executives have said they will invest $ 30 billion. dollars in the development of battery-electric vehicles from 2020 to 2025.

Ford chief executive Jim Farley said the automaker had ordered 160,000 of its F-150 Lightning electric pickup trucks and its Transit electric van was “completely sold out.”

Ford reported higher-than-expected third-quarter profit and raised its full-year profit guidance as strong demand for its trucks helped offset the blow from a global semiconductor shortage . Read more

However, Ford warned that rising steel and aluminum prices could cost it $ 1.5 billion next year, and warned of “inflationary pressure affecting a wide range of costs.” in 2022.

Ford reported revenue of $ 35.7 billion for the last quarter – more than GM, long the largest company by vehicle unit sales and overall revenue. GM earlier Wednesday reported quarterly revenue of $ 26.8 billion. Read more

Barra said the company has been hit by semiconductor plant closures linked to a pandemic in Malaysia. Ford executives said their chip supplies had improved.

Ford’s net profit fell to $ 1.8 billion from $ 2.4 billion a year earlier. Still, Ford said it would reinstate a quarterly dividend, paying shareholders 10 cents per share or $ 400 million in total in the fourth quarter.

Ford’s Farley said the automaker expects a quick recovery as the pandemic and supply chain grunts abate.

Another challenge that GM and Ford will share if supply chain pressures ease in the second half of 2022 is finding a new sweet spot for prices, production volumes and vehicle inventory at dealerships.

Ford officials have said the company wants to aim for 50 days of vehicles in stock, not the 75 that were normal before the pandemic. Barra said GM also wants to control inventory more strictly.

“As availability improves… the very high prices will mitigate some,” said Barra. “But we will be very disciplined. “

Report by Paul Lienert and Ben Klayman in Detroit; Writing by Joseph White; Editing by Cynthia Osterman and Sonya Hepinstall

Our Standards: Thomson Reuters Trust Principles.

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