Chip shortage dents production at slew of automakers but worst may be over

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FRANKFURT (BLOOMBERG, REUTERS) - Volkswagen, Stellantis and two US automakers have disclosed how the worldwide shortage of computer chips has weighed on results and production, while saying that the worst of the disruption may be over.

Volkswagen said on Thursday (Oct 28) the supply woes on chip components that have caused massive order backlogs are easing with steady improvements expected into next year.

Availability of semiconductors will be much better during the fourth quarter and ease further "quarter after quarter" into next year, chief executive officer Herbert Diess said in an interview with Bloomberg Television. There may remain "some constraints," he said, as VW works to meet unfilled orders in the region of half a million cars.

Carmakers have faced the worst of supply issues during the third quarter after availability of chips became even scarcer following factory shutdowns in south-east Asia.

Ford Motor's third-quarter revenue fell about 5 per cent from a year earlier, to US$35.7 billion (S$48.1 billion), while General Motors' revenue declined 25 per cent, to US$26.8 billion.

But Ford on Wednesday said the critical shortage of components had already eased, and GM CEO Mary Barra noted the shortfall growing less severe.

Volkswagen still stuck to its margin forecast, even as the unprecedented supply issues saw profit decline during the third quarter. Europe's biggest automaker cut its forecast for annual deliveries and now sees vehicle sales in line with a year ago after expecting noticeably higher auto sales previously.

Its third-quarter operating profit before special items fell 12 per cent to 2.8 billion euros (S$4.38 billion) compared with last year when pandemic-related restrictions weighed on sales, VW said.

Like other carmakers, Volkswagen has navigated the chip crisis by focusing production on its most lucrative models to keep up returns with the Porsche and Audi luxury brands. Sustaining profit is vital for Volkswagen to bolster the industry's most ambitious electric-car rollout plan and stand a chance of closing in on Tesla.

Stellantis on Thursday reported a 14 per cent fall in third-quarter revenue on a pro-forma basis after chip shortages cut planned quarterly production by 30 per cent or 600,000 vehicles.

Chief financial officer Richard Palmer however said the company was seeing a "moderate" improvement in chip supply in October and expected that trend to continue through the fourth quarter.

The carmaker, formed at the beginning of this year through the merger of Fiat Chrysler and France's PSA, confirmed its full-year target for an adjusted operating profit margin of around 10 per cent.

GM needs to continue ringing up large profits because it is investing heavily in the development of new electric vehicles and in building plants to make them. Ms Barra said a new battery plant in Ohio - a joint venture with LG - would begin production next year.

GM plans to introduce 30 new electric models around the world by 2025, including 20 in North America.

Ford is also making a big EV push, including an electric version of its top-selling F-150 truck. It announced last month that it would spend billions of dollars to build three battery factories and an electric truck plant in the United States, creating 11,000 jobs over the next four years.

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