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US auto manufacturer are reporting sales increase in Q1 over last year. Ford is reporting a 0.6% increase. General Motor is up 3.7% with retail sales up 19% and fleet sales down 35%. Stellantis also reporting a 5.1% increase. Remember that these numbers are compared to 2020’s Q1 numbers that are heavily affected by Covid and stay at home orders.
This good news does come in the midst of more production plant idle time and I am interested to see how these huge production delays right now are going to affect future vehicle availability, especially for fleets and businesses.
Ford is idling their F-150 production at their Dearborn Michigan plant april 5th – 19th. F-150 production at the Kansas City plant is also going to be idle the week of april 5th. These plants are both cancelling overtime in the near future as well, as parts are still not available. Ford has stated they believe this parts shortage could take 2.5 billion dollars off 2021 profits.
Jim Farley CEO of Ford had his salary increase 40% from 2019 up to $11.8 million in 2020. The executive team only met 23% of performance targets including missing all revenue, cash flow, and pre tax earnings goals but exceeded the company’s quality targets. Ford’s compensation committee made a one-time change to their bonus plan to award Ford’s top executives for their response to covid.
Volkswagen made an announcement that they will be renaming their NA operations to Voltswagen as a sign of their commitment to the electrification of vehicles. The media took this and ran with it even though, suspiciously, this announcement was made within days of April fools and the name had not even been filed for a trademark. Low and behold VW is now saying that it was all a marketing gimmick for April fools. I would say it was very successful as even this morning people are still writing articles about it.
President Biden announced Wednesday in his 2 trillion dollar infrastructure bill a plan to help push electric vehicle adoption. Some of the bullet points are funding for 500,000 charging stations, an upgraded electrical grid, and rebates for purchasing electric vehicles. The plan also maps a path to 100% clean buses.
Electric vehicle manufacturer Rivian released details on their battery warranty. It will be 8 years or 175,000 miles whichever comes first. This is going directly against Tesla’s 8 year 150,000 mile battery warranty. Rivian has been picking up a ton of steam lately even competing with Stellantis for the spot as the 3rd largest auto company in the United States.
GM recalled about 10,000, 2021 vans with 6.6L engines. This recall involves engine fires caused by a short circuit. Owners are advised to park the vans away from structures until the recall is completed.
Automakers are just now realising that their “just-in-time” approach to production is not a very robust business practice. Just-in-time production basically means that all parts arrive within a very short timeframe, the item being produced is put together as quickly as possible and thrown out the door. This business model makes a lot of sense for some businesses that use readily available parts that can be purchased from multiple suppliers. This is not the case in the auto industry. Auto manufacturers use specialized materials and parts that are only available from a few sources or in many cases one source. The crazy part about this is that most of the manufacturers use the exact same supplier. Let me give you an example, in 2018 a magnesium plant caught on in Michigan. This fire caused several delays for Ford GM and FCA. How is it that one manufacturer of a seemingly small part can cripple the entire supply chain? There is no diversity or competition in some of these segments and these multi billion dollar companies entire operations can be shut down due to a small act of nature in a plant that they don’t even own. As far as I can tell there is no progress being made by the auto manufacturers to bring any of this supply chain in house so they can better control them. This seems like an achilles heel for some of the largest companies in the world and I am surprised it is not further up their priority list.
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