DETROIT, Oct 27 (Reuters) - Detroit automakers Ford Motor Co
and General Motors Co both took advantage of
insatiable demand from U.S. consumers for trucks and SUVs to
offset the pain caused by supply chain bottlenecks.
But both automakers warned investors that the cost pressures
created by disruptions in the global semiconductor supply chain
and price spikes for other commodities will continue well into
For the Detroit automakers, that means sustaining a complex
juggling act: Pushing the price envelope on popular vehicles
such as the Ford F-150 or Cadillac Escalade while scrambling to
stabilize flows of semiconductors and keeping a lid on the costs
of raw materials from steel to aluminum to magnesium.
How much higher prices https://www.reuters.com/business/us-companies-keep-prices-high-supply-chain-headaches-persist-2021-10-27
can go is a key question. The average GM vehicle sold for more
than $47,000 during the third quarter. Ford raised prices on
vehicles sold in North America by nearly $3,500 each, on
average. Both companies said the higher prices offset higher raw
material costs in the quarter.
The results Ford and GM reported on Wednesday show managing
the supply chain pressure will not be easy, and that investors
are watching the companies closely and critically.
GM shares tumbled 5.2% on Wednesday even though the company
said its full-year 2021 operating profits would be at the high
end of a range between $11.5 billion to $13.5 billion.
Both of the once-dominant Detroit automakers are now
overshadowed by electric vehicle maker Tesla Inc, which
last week reported stronger profit margins and earlier this week
achieved a market capitalization of $1 trillion, more than its
top five rival automakers combined.
While relying almost entirely for now on profits from
petroleum-fueled trucks, both GM and Ford executives talked up
their ambitions to challenge Tesla in the EV market.
GM Chief Executive Mary Barra told CNBC the company could
"absolutely" catch up to Tesla in U.S. sales of EVs by 2025.
Ford executives said they will invest $30 billion in battery
electric vehicle development from 2020-2025.
Ford Chief Executive Jim Farley said the automaker has
orders for 160,000 of its electric F-150 Lightning pickups, and
its electric Transit commercial van is "completely sold out."
Ford reported a stronger-than-expected third-quarter profit
and raised its full-year earnings forecast as strong demand for
its trucks helped offset the hit from a global semiconductor
However, Ford cautioned that higher steel and aluminum
prices could cost it $1.5 billion next year, and warned of
"inflationary pressure impacting a broad range of costs" in
Ford reported revenues of $35.7 billion for the latest
quarter - more than GM, long the larger company by vehicle unit
sales and overall revenue. GM earlier on Wednesday reported
quarterly revenue https://www.reuters.com/business/autos-transportation/gm-upbeat-full-year-earnings-despite-quarterly-profit-drop-2021-10-27
of $26.8 billion.
Barra said the company was hit by pandemic-related shutdowns
of semiconductor factories in Malaysia. Ford executives said
their supplies of chips improved.
Ford's net income fell to $1.8 billion, from $2.4 billion a
year earlier. Still, Ford said it will restore a quarterly
dividend, paying shareholders 10 cents a share or $400 million
in total in the fourth quarter.
Ford's Farley said the automaker expects a rapid recovery as
the pandemic and supply chain snarls ease.
Another challenge GM and Ford will share if supply chain
pressures do ease in the second half of 2022 is finding a new
sweet spot for prices, production volumes and inventories of
vehicles at dealerships.
Ford officials said the company wants to aim for 50 days of
vehicles in stock, not the 75 that was normal before the
pandemic. Barra said GM also wants to keep inventories in
"As availability does improve
the very strong pricing will
mitigate some," Barra said. "But we will be very disciplined."
(Reporting by Paul Lienert and Ben Klayman in Detroit; Writing
by Joseph White; Editing by Cynthia Osterman and Sonya