US automakers provide varied production outlooks amid chip crunch

US automakers expressed varied opinions during third-quarter earnings calls regarding the timeline of their respective inventory recoveries after months of production outages in 2021 caused by the global semiconductor shortage.

Stellantis, the parent company of US-based Chrysler, expects its production and inventory levels to rebound to some degree in the fourth quarter compared with the previous two quarters, but a full recovery may still be over a year away, CFO Richard Palmer said Oct. 28.

"The volatility we're seeing in supply related to semiconductors is not necessarily a short-term item," Palmer said during a call with analysts. "We still see this continuing for 12 months or so as, hopefully, things start to improve, but it's going to be sort of incremental. There's not going to be a big one-off improvement."

\Stellantis saw vehicle production in Q3 drop nearly 30% year over year, or about 600,000 units, due to a lack of semiconductor chip supplies, Palmer said. The decrease in output was more severe than projections released in August, he added.

"Our planning visibility regarding semiconductors continues to be rather limited," Palmer said. "However, based on the stabilization we've seen through the end of Q3 and into October so far, we are seeing some progress with some of the key suppliers, and we do expect moderate improvements in supply in Q4 compared to Q3."

General Motors previously forecast its vehicle production volume to plunge 200,000 units in the second half of the year from the first half, but most of the impact was absorbed in the third quarter with recovery seen as early as the fourth quarter, CFO Paul Jacobson said Oct. 27.

"We expect a pretty sizable step-up in volume sequentially from Q3 into Q4," Jacobson told analysts on a call. "Volume is certainly recovering off of where we were in Q3, which is consistent with what we said, and we would hope to see that and expect to see that as we go through 2022."

GM delivered 446,997 vehicles in the US in Q3, down 218,195 units from the year-ago quarter because of semiconductor supply chain disruptions and historically low inventories, according to its earnings report.

Ford Motor CFO John Lawler said the chip shortage situation was "dynamic" and may continue to have a significant impact on automaking operations into 2022 or 2023.

"We're doing everything we can to get our hands on as many chips as we can, but we do see that running through 2022," Lawler said. "It could extend into 2023, although we do anticipate the scope and severity of that to reduce as we move through 2022."

OEMs see little risk from magnesium shortage

Though semiconductor chip supplies have burdened vehicle production in 2021, auto OEMs said the potential for magnesium shortages does not present the same risk to their operations.

GM CEO Mary Barra said the magnesium concerns stemming from China and impacting both Europe and Asia should not substantially impact North American vehicle production.

"While we do think there is some near-term price escalation risk, we do not see it as a significant supply risk or a constraint," Barra said during GM's earnings call.

Magnesium is a common alloying agent in aluminum products that are used in various vehicle components.

"The aluminum alloys we purchased have a very small percent of magnesium, and nearly all of our aluminum is domestically sourced, so we are working with our supply base and we continue to monitor the situation," Barra added.

Palmer provided similar commentary regarding Stellantis' production in relation to magnesium consumption.

"For magnesium in the short term, we're not seeing any issues," he said. "The sourcing of aluminum is relatively localized in our major markets. China is not a major market for us at this stage, so if the issues there start to affect other markets in the medium term, we'll see, but we're not seeing anything at the moment."

Any concern for the magnesium supply chain is based more on financial issues rather than availability, Lawler said.

"We are seeing price pressure on aluminum broadly as we saw all year, and we probably see a little bit more price pressure due to the magnesium issue," Lawler added. "But our aluminum sheet suppliers don't purchase magnesium from China for North American production, so we don't see that having any significant impact or any impact on us."