Ford is laying off hundreds and also lost billions of dollars, Volkswagen is considering expanding its U.S. plant, and dealers. All that and more in The Morning Shift for Thursday, April 28, 2022.
That sounds like a big deal, but for a company like Ford, it is basically a blip. Ford attributed most of the loss to a decline in the stock price of Rivian, which Ford owns a chunk of. Ford’s core business of selling cars seems to be doing more or less just fine.
From Automotive News:
Ford was profitable before accounting for the Rivian investment, though adjusted earnings fell 41 percent from a year earlier to $2.3 billion before interest and taxes. Its adjusted profit margin was 6.7 percent, down 4.1 percentage points.
Revenue during the latest quarter fell 5 percent to $34.5 billion, the company reported Wednesday. The value of Ford’s Rivian shares fell by more than half to $5.1 billion during the quarter. The EV startup’s stock tanked from about $102 per share at the beginning of the year to about $50 on March 31 – and has fallen even further in April to around $30.
Executives on Wednesday declined to comment on Ford’s plans for the Rivian holding, although CEO Jim Farley told Automotive News late last year that Ford “loved its future as a company.” Ford can not sell any of its roughly 12 percent stake in the EV startup until a lock-up period for pre-IPO investors ends next month.
Ford said the industry’s ongoing microchip shortage hampered company production in January and February but that March output was higher. Its wholesale shipments fell 9 percent in the quarter to about 970,000.
“The capability of this business is much stronger than what we were able to provide in the quarter,” CFO John Lawler told reporters.
Clean it up
Features incredibly methodical cleaning, has a deep clean feature for big days, is great at getting pet hair, and even comes with a self-emptying base.
Ford also said Wednesday that it was eliminating 580 jobs, a mix between in-house jobs and agency jobs, according to Auto News. This perhaps came as a surprise to those whose jobs are affected, because Ford this week has also been celebrating how bright the company’s future is.
The automaker is eliminating about 350 salaried and 230 agency positions on U.S. engineering teams, according to a spokeswoman. Ford alerted affected employees earlier Wednesday.
“We continue to align staffing around the critical skills needed to deliver our products, services, and the Ford+ plan,” a Ford spokeswoman said in a statement.
Usually, when you lose a job, the writing has been on the wall for a while, or at least that is my experience. Still, it sucks, and also usually comes with the same insulting statement about how not-critical your work was.
VW’s American business has been a curiosity for some time now, mostly because they haven’t made money on it recently and VW appears to be here pretty much exclusively as a branding exercise. Still, the automaker has found a bit more purpose lately with the ID.4 and its other electric ambitions. According to Reuters, VW’s ambition is good enough to possibly expand its plant in Chattanooga, Tennessee.
The move would help the German automaker grow its market share in North America, which it identified in March as the region with the greatest growth potential but which was unprofitable for several years before 2021.
Volkswagen said in March it was shifting production to China and the United States as a result of the war in Ukraine.
Earlier on Thursday, Manager Magazin reported that the German carmaker was planning to build a second production plant in the United States, increasing its production capacity there to up to 600,000 vehicles per year.
Citing stakeholders, the magazine said the new plant could be built next to the current Chattanooga factory and that the carmaker is also considering construction of a battery cell plant.
Volkswagen declined to comment.
Volkswagen is the second-biggest automaker in the world, or maybe even the biggest, depending on how you count, and it’s always been a little bit of a mystery to me why modern VW struggles in the U.S., outside of GTI stans. Perhaps it is their reputation for shoddy reliability, or maybe just VW’s overwhelming mediocrity. In its current stable, probably only Arteon is truly desirable.
The company blamed supply chain issues.
First-quarter operating profit fell to 6 billion crowns ($607.4 million) from 8.4 billion a year ago, the company said in a statement on Thursday. EBIT margin was 8.1 percent, down from 12.3 percent during the same period last year.
The difference in the EBIT is because Volvo benefited from two large financial one-offs in the first quarter of 2021 that added 3 billion crowns ($304.7 million) to its books, Volvo CFO Bjorn Annwall told Automotive News Europe.
If those were excluded, the EBIT margin for the first three months of 2022 would have beaten the 2021 figure, he said.
A global shortage of semiconductors forced Volvo to halt production in the first quarter.
The automaker warned that the supply problem was expected to continue in the second quarter.
Annwall said Volvo has seen positive signs, including a more consistent supply of chips, that indicate the shortage will improve in the second half.
“The semiconductor shortage has clearly taken out a lot of volume but the industry has improved its pricing discipline due to the shortage of supply” to help offset the hit, he said in an interview.
“Pricing discipline” is a new one, by which this Volvo man really means “charging consumers more for cars and not offering as many incentives,” which is really just the ancient law of supply-and-demand, which is really just, you know, capitalism. I’m old enough to remember, early on in the pandemic, when carmakers were absolutely desperate to sell cars.
At any rate, the Financial Times says that Volvo is having supply chain issues also because of China.
Volvo Cars has begun sourcing alternatives to its Chinese-made parts as coronavirus lockdowns now spreading across the country add a new supply chain threat to an auto industry that has been beset by them over the past year.
The company started double sourcing components that are obtained in China in a bid to shield its operations from potential disruption, according to chief executive Jim Rowan.
“The longer the pandemic stretches the more uncertainty there is. We have already implemented a strategy of ‘make where we sell’ and ‘source where we make’,” he said.
“We have already started a programme some months ago to source more components out of China so that we’re double sourcing, but that doesn’t happen overnight,” he added.
Please pray for Volvo in this trying time.
Debbie Stabenow and Gary Peters, both Democrats, wrote a letter to Pete Buttigieg, who is the Secretary of Transportation, asking what the deal is with the U.S. and self-driving cars.
The Detroit News reports:
The senators emphasized the need for the technology to make roadways safer and more accessible, while staying ahead of countries like China in its development. They said self-driving vehicles represent opportunities for different jobs in manufacturing as well as in logistics, transit and passenger transportation.
“Yet, we lag behind in shaping a regulatory framework that will foster this innovation,” the Michigan Democrats and their colleagues wrote, “while simultaneously protecting and encouraging all of the important benefits we believe autonomous vehicles are capable of delivering.”
The senators requested information on specific actions the department is taking in the near term, which authorities will oversee the development and manufacturing of autonomous vehicles, how it will consider the jobs impact in its development of transportation policy, its plans for modernizing federal safety standards to account for self-driving vehicles, and what data are needed to create those benchmarks.
The letter seeks information on how the department is evaluating manufacturers’ requests for exemptions from current standards to deploy autonomous vehicles and how it is communicating the procedures and timeline to those stakeholders. It also seeks clarity on the involvement of state and local governments that will have to address federal policies in their territories for licensing, liability and related matters.
The Detroit News left a message with the Transportation Department’s press office late Thursday afternoon.
I, too, want to know what the deal is with autonomous vehicles, and if the feds will ever regulate them in a serious manner. My guess is “haha no.”
Speaking of Democratic senators from the Midwest, Sherrod Brown, who is a senator from Ohio, wants to give auto dealerships a lift, because they are apparently suffering somehow.
Prepare to enter the weeds of tax law, via Automotive News:
U.S. Sen. Sherrod Brown, D-Ohio, plans to introduce legislation Thursday that would provide relief to dealerships that use the “last in, first out” inventory accounting method and have struggled to maintain inventory levels because of the global semiconductor chip shortage.
The bill would provide a statutory determination that the requirements for a qualified liquidation under Section 473 of the Internal Revenue Code have been satisfied for new-vehicle dealers that have experienced a reduction of new vehicles held in LIFO inventory. The relief would give dealers up to three years to restore their inventories to more normal levels.
“Auto dealers continue to face dramatic and unprecedented inventory shortages as a result of pandemic-related foreign supply chain disruptions and, without support, recovery could be long and hard for Ohio’s affected local businesses, employees and their customers,” Brown said in a statement. “This legislation will grant much-needed tax relief to auto dealers facing unique supply chain challenges.”
[The National Automobile Dealers Association] and the Alliance for Automotive Innovation — along with some Senate Democrats led by Brown and a bipartisan group of U.S. representatives led by [U.S. Rep. Dan Kildee, D-Mich] — previously urged the Treasury Department to grant temporary LIFO relief under Section 473.
“Treasury indicated its unwillingness to do so, and so Congress is moving forward, showing the leadership to provide the meaningful relief that’s needed to respond to the global supply chain crisis and all of the problematic consequences that it has created,” Paul Metrey, NADA’s senior vice president of regulatory affairs, told Automotive News this month.
For some dealers, the LIFO recapture has led to additional tax payments from $100,000 to $2 million or more, and those bills were due last week for dealerships structured as pass-through entities or C corporations.
If this sounds like a giveaway to auto dealers, that’s because it probably is. And if you’re wondering why dealers still exist, despite being generally terrible, it’s because of quiet moves by lawmakers like this, that no one ever pays attention to.
On April 28, 1916, Ferruccio Lamborghini, the founder of the company that bears his name and is…
Lamborghini started making cars, of course, because his Ferrari was bad.
I am moving slowly this morning, perhaps because of the consumption of alcoholic beverages last night, though that doesn’t fully explain it either. It is either because I ran two miles yesterday or I am old.