LIVE FROM NADA
Every year Crowe Partners participate in sessions hosted by Auto Team America at the NADA annual conference. Below are notes from those meetings.
For more information contact Conven Tang in our Edmonton office.
Mergers and Acquisitions
WHY NEARLY EMPTY AUTO LOTS MAKE THIS PUMP-PRICE SHOCK DIFFERENT
Gasoline soaring above $4 a gallon this month has inspired comparisons to 2008, when pump prices sapped demand for fuel-guzzling SUVs and helped push Detroit’s automotive behemoths into bankruptcy. While Americans still love their spacious sport utility vehicles, and pump prices are only moderately higher than their peak in 2008, the similarities mostly end there. Fourteen years ago, demand for trucks and SUVs cratered as consumers sought more fuel-efficient sedans, or stopped buying altogether. The financial system was collapsing, savings were going up in flames and automakers were producing way more cars than consumers wanted.
CAR DEALERS ARE OPTIMISTIC, BUT SUPPLY CRISES, WAR CONCERNS -SURVEY
Dealers, following a year of soaring profits but scant new-vehicle inventory, expect more of the same in 2022. But a pair of relatively new worries are hindering outlooks for some dealers: the impact of Russia's invasion of Ukraine and rising gasoline prices in the U.S. Those joined the concerns around the lingering microchip shortage and its disruption to vehicle production and supply levels for dealers answering Automotive News' 2022 Dealer Outlook Survey.
Source: Automotive News
VW WARNS OF RISKS FROM UKRAINE CRISIS AS OPERATING PROFIT DOUBLES
Volkswagen AG, Europe's top carmaker, doubled its operating profit in 2021 but warned that Russia's invasion of Ukraine and its impact on supply chains could hit business this year in unforeseen ways. Carmakers are scrambling to find alternative sources of vital parts made in Ukraine, including wire harnesses, from as far afield as China and Mexico, as Russia's invasion halts assembly lines and breaks complex supply chains.
MANUFACTURERS ANNOUNCE CHIP ADJUSTMENTS
Ford Pushing Back Dealer Allocations Until Late May; 100,000 Units Lost As Suppliers Struggle to Deliver Parts
Ford Motor Co., beset by ongoing production woes, told dealers on Saturday it was pushing back allocations and that wholesale deliveries will be lighter until the end of May, although it continues to produce vehicles and fill customer orders. Ford dealers who attended a make meeting told Automotive News they did not expect new stock allocations until the end of May due to production cuts, although Ford spokesman Said Deep said the company continues “building for both retail and stock.”
Source: Automotive News
Ford Will Ship and Sell Vehicles Without Chips Controlling Non-Safety Critical Features
Ford Motor Co., attempting to ease inventory constraints, plans to ship and sell partially built vehicles that are awaiting semiconductors or related components that control non-safety critical features, executives told dealers in a meeting here Saturday, according to three people present. The plan is a revision of an idea floated in July, where Ford considered shipping partially built vehicles to dealers to sit on their lots until parts became available. Now, according to the people, the partially built vehicles Ford will send dealers will be both drivable and sellable.
Chip Crunch Extends Jeep Cherokee, Ford Truck Downtime
A global microchip shortage is extending downtime at two North American plants of the Detroit Three this week. Ford Motor Co. is idling its Ohio Assembly Plant in Avon Lake for a second consecutive week. The plant produces medium-duty trucks, vans and Super Duty chassis cabs, employing more than 1,700 people. The Dearborn automaker has said chip issues are expected to persist in the first quarter with hopes for improvement in the second half of the year. Belvidere Assembly Plant in Illinois also will be down again this week.
Source: The Detroit News
Chip Crunch Forces Further Production Cuts at Toyota
Toyota Motor Corp said on Tuesday it would make additional production cuts in March due to a shortage of semiconductor chips, days after the Japanese automaker reduced its domestic production target by as much as 20% for the April-June quarter. Toyota said it would suspend production on one line at a factory for eight weekdays starting March 22 through the end of the month. That is in addition to the suspension of domestic production at two factories announced last month.
HYUNDAI FREEZES FLEET SALES, PUSHING INVENTORY TO DEALERS
Hyundai is slashing fleet sales, increasing vehicle production and freezing dealer count as it targets another record year for U.S. retail sales. All of which was music to the ears of Hyundai retailers during the brand's make meeting at the tail end of the NADA Show on Sunday.
Source: Automotive News
DEALERS REACT TO FORD CREATING SEPARATE EV AND ICE UNITS
A packed room of Ford and Lincoln dealers listened to the automaker’s executives outline bold plans to split the company into separate units: one for electric vehicles, the other for vehicles powered by traditional internal-combustion engines. Dealers interviewed afterwards – including those who were not initially all-in with the reorganization plans – say they liked what they heard during Ford’s closed-door dealer franchise meeting at the annual National Automobile Dealers Assn. Convention and Expo here.
VW SHIFTS MORE PRODUCTION TO NORTH AMERICA, CHINA AMID EUROPE’S ISSUES
Volkswagen Group is shifting more production to North America and China as a result of the war in Ukraine and will prioritize China this year, CEO Herbert Diess said in a press call on Tuesday. “We will shift more into China because of the situation in Europe,” Diess said. When asked about how the carmaker would respond in the event that China attacked Taiwan, he said that he did not believe the country would take such a step. In North America that's expected to mean increased output from VW-brand plants in Chattanooga and Puebla, Mexico, as well as the Audi plant in San Jose Chiapa, Mexico, all of which assemble crossovers sold primarily in the U.S.
TESLA RAISES PRICES ACROSS LINEUP; CHEAPEST MODEL IS NOW $46,990
Tesla Inc. raised prices on all its vehicles after Chief Executive Officer Elon Musk said costs were increasing at the companies he runs. The cheapest Model 3 in the U.S. is now $46,990, according to Tesla’s website. The company raised prices by 3% to 5% in both the U.S. and China, Dan Levy, a Credit Suisse analyst, said in a note to clients. Musk tweeted earlier this week that both Tesla and Space Exploration Technologies Corp. we’re seeing “significant” inflation in raw materials and logistics. This is Tesla’s second round of price increases in the last week.
CADILLAC TO TAKE LYRIQ EV ORDERS THIS SPRING
Cadillac will open the order books for the Lyriq, its first electric vehicle, this spring. General Motors' luxury brand will begin taking new orders for the 2023 Lyriq and the 2023 Lyriq performance all-wheel drive on May 19, Rory Harvey, vice president of global Cadillac, told reporters Tuesday. Unlike reservations, the Lyriq orders will be logged directly into dealers' systems, Harvey said. The process will be the same as placing an order for a CT4, Escalade or any vehicle available today through Cadillac.com or a dealership's website.
LOST CARS ABOARD SUNKEN FELICITY ACE WILL BE REPLACED, SAY BRAND CEOS
The U.S. customers whose high-end vehicles are now on the floor of the Atlantic Ocean in the burned hulk of Felicity Ace will all get their orders filled — including 15 out-of-production Lamborghini Aventador Ultimae editions, the CEOs of Volkswagen Group's premium brands told Automotive News. In an online roundtable with journalists from the U.K. and U.S. a day before Audi's annual press conference Thursday, Automobili Lamborghini CEO Stephan Winkelmann said executives at the supercar brand had to scramble to be able to replace the $500,000 hand-crafted Aventador Ultimae editions on board.
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