Pressures Are Altering the Supplier Landscape
The industry's outlook may be brightening, but for many parts makers, it's still a dark time of perilous finance and strategic rethinking, reports Automotive News. Even as car dealers scramble to meet new demand, several global suppliers are struggling with deflated profit margins resulting from a disastrous 2020 and the pandemic-caused crash in vehicle production. Dire earnings reports this summer have prompted some suppliers to sell off operations, rethink strategies and even seek bankruptcy protection. And there's much more coming. The global industry likely will see 50 to 100 additional supplier bankruptcies in the next six to nine months, forecasts Dietmar Ostermann, U.S. automotive advisory leader for PwC. "The ramp-up has gone well, but the bankruptcies are not done yet," Ostermann told Automotive News last week as he drove away from a supplier visit. Crisis support from lenders and governments? "That's over now. The banks are tightening back up, and a lot of suppliers are still not in good shape. Many of them are loaded up in debt when they need cash. Certainly, some plants will close." Read more here (Source: Automotive News).
Honda Quitting F1, Shifting Resources to EV Development
Honda will pull out of Formula One racing at the end of next year, a move it says is necessary to free up funding for what is becoming a very costly effort to develop competitive zero-emissions vehicles, reports The Detroit Bureau. The third-largest Japanese automaker isn’t alone in shifting resources in order to focus on EV development. Volkswagen is believed to be looking at the sale or spinoff of three of its many brands for much the same reason. Like the rest of the auto industry, Honda has been hit hard by the events of a turbulent year but, in an online news conference, CEO Takahiro Hachigo said the decision to pull out of the F1 World Championship series “is not a result of the coronavirus pandemic but because of our longer-term carbon-free goal.” Honda has said that it wants to have fully two-thirds of its global sales come from vehicles using alternative power technologies by 2030. This includes conventional hybrids, plug-in hybrids, pure battery-electric vehicles, and products powered by hydrogen fuel cells. Read more here (Source: The Detroit Bureau).
Dealers Get Creative in Inventory Hunt
In one of the most unusual used-vehicle selling years ever, dealers often have had to switch up the way they get inventory and — in some cases — throw out their valuation playbook altogether, reports Automotive News. Used-vehicle sales were set for another strong year, but just a few months into 2020, the market was unexpectedly sent spiraling downward. When the pandemic shut down automaker plants in the spring, new-vehicle inventory became tight — and has remained so. New-vehicle inventories nationwide were down to 2.3 million vehicles as of August, according to figures from Cox Automotive, marking the lowest level since November 2011. While automakers stopped making cars and trucks in March and April, consumers also were mostly staying home, and physical auctions reduced operations temporarily and went mostly digital. Wholesale vehicle values plummeted. Read more here (Source: Automotive News).
Exploding Takata Air Bag Inflator Kills Another Driver
Another person has been killed by an exploding Takata air bag inflator, bringing the worldwide death toll to at least 26, reports the Detroit Free Press. The latest death occurred Aug. 20 in Mesa, Arizona, in the crash of a 2002 Honda Civic, according to a statement released Saturday by Honda. It was the 17th death reported in the United States. Others have been reported in Malaysia and Australia. Takata used volatile ammonium nitrate to create a small explosion to inflate air bags in a crash. But the chemical can deteriorate over time when exposed to moisture in the air. The explosion can blow apart a metal canister and hurl shrapnel into the passenger compartment. The problem caused the largest series of auto recalls in U.S. history, with at least 63 million inflators recalled. The U.S. government says that as of September, more than 11.1 million had not been fixed. About 100 million inflators have been recalled worldwide. Read more here (Source: Detroit Free Press).
GM, Ford Need Electric-Car Batteries, but Take Different Paths to Get Them
Automakers, pumping billions of dollars into developing electric cars, are now facing a critical choice: get more involved with manufacturing the core batteries or buy them from others. According to The Wall Street Journal, batteries are one of an electric vehicle’s most expensive components, accounting for between a quarter and a third of the car’s value. Driving down their cost is key to profitability, executives say. But whereas the internal combustion engine traditionally has been engineered and built by automakers themselves, battery production for electric cars is dominated by Asian electronics and chemical firms, such as LG Chem Ltd. and Panasonic Corp., and newcomers like China’s Contemporary Amperex Technology Co. With regulators world-wide pushing car companies to sell more electric cars, auto executives worry there won’t be enough factories building high-quality batteries. Read more here (Source: The Wall Street Journal).
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