The U.S.’s largest auto makers confronted another challenging year in 2022 with supply-chain snarls and poorly stocked dealership lots denting sales results and concerns mounting about an economic downturn.
The Detroit auto maker also retook its U.S. sales crown from
Toyota Motor Corp.
TM -0.65%
, outselling its Japanese rival by about 165,630 vehicles last year.
Toyota had overtaken GM in 2021 as the U.S.’s top-selling auto maker, an upending of the traditional pecking order that was largely due to parts shortages that both car companies viewed as temporary.
Toyota said its U.S. sales were down 9.6% in 2022, and
Hyundai Motor Corp.
closed last year with a 2% decline.
Most other car companies report throughout the day Wednesday.
Ford
plans to report 2022 sales results Thursday.
Industrywide, U.S. auto sales are projected to total 13.7 million vehicles in 2022, the lowest figure in more than a decade and an 8% decrease from the prior year, according to a joint forecast by J.D. Power and LMC Automotive. Sales are expected to remain well below prepandemic levels of roughly 17 million.
WSJ toured Rivian’s and Ford’s electric-vehicle factories to see how they are pushing to meet demand. Illustration: Adam Falk/The Wall Street Journal
The drop-off marks a reversal for a sector that started the year hoping historically low interest rates and an end to parts shortages would fuel a rebound in sales. Instead, vehicles continued to be in short supply as car makers mostly waited for scarce computer chips. Russia’s invasion of Ukraine, a key supplier of auto parts, added to the supply-chain troubles.
A prolonged shortage of semiconductors created pent-up demand for new vehicles, which meant that cars and trucks went to waiting buyers almost as soon as they hit the dealer lot. The lack of availability left buyers paying top dollar for the rides they could secure, pushing the average price paid for a vehicle in December to a near record high of $46,382, according to J.D. Power.
The record high prices buoyed auto maker profits last year despite shrinking sales volume and insulated the industry from a broader decline in consumer spending.
Now, while some supply constraints are easing, auto executives are confronting other obstacles, such as rising interest rates and soaring materials costs. Inventory levels are bouncing back, putting pressure on car companies to resist the kinds of profit-damaging discounts that have been historically used to counter slowing demand.
Photos: The EV Rivals Aiming for Tesla’s Crown in China
Some analysts caution that it is still too early to tell if rising prices are pushing buyers away. Heavy snowfall in large parts of the northern U.S. weighed on December sales, making it hard to see the impact of higher prices, JPMorgan analysts wrote in a note to clients.
Still, there are early signs that demand might be slowing, even for the hottest car makers.
Tesla Inc.
reported Monday that it fell short of its growth projections last year, in part because of Covid-related shutdowns at its Shanghai factory and changes in the way it manufactures and distributes vehicles.
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Analysts have pointed to decreased wait times for Tesla vehicles as a sign of softening demand. Tesla offered a rare discount on some of its vehicles if buyers agreed to take delivery before the end of 2022.
Electric-vehicle sales accounted for 3% of the U.S. retail market in 2021 and nearly 6% in 2022, according to J.D. Power.
Executives have been investing billions of dollars on new models and factories, in the belief that sales will continue to expand rapidly over the next decade.
But rising prices for raw materials used in lithium-ion batteries pushed up EV prices throughout 2022, and some executives warned of a looming battery shortage.
General Motors cut its EV sales target for 2023 because of a slower-than-expected increase of battery production.
The semiconductor shortage, while easing for some other sectors, such as smartphones and personal computers, remains a challenge for autos, in part because car companies typically use inexpensive, commodity silicon for vehicles. Toyota, citing a lack of chips, cut its production outlook for the current fiscal year through March.
Falling used-car values are also discouraging to potential buyers, who have trade-ins and are looking to use them to offset the higher cost of a new vehicle.
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That bodes poorly for sales this year, as retailers worry that buyers who were unable to buy a car as a result of shortages will now be priced out of the market, according to a survey of dealers conducted by Cox Automotive.
The research site Edmunds expects new-car sales to hit 14.8 million in 2023, a marginal increase from last year but well below prepandemic levels. A combination of rising rates, inflation and economic turmoil could push vehicles out of reach for many buyers, Edmunds said.
WASHINGTON—The Senate Finance Committee has opened an inquiry into whether auto makers including
Tesla Inc.
and
General Motors Co.
are using parts and materials made with forced labor in China’s Xinjiang region.
In a letter sent Thursday, the committee asked the chief executives of eight car manufacturers to provide detailed information on their supply chains to help determine any links to Xinjiang, where the U.S. government has alleged the use of forced labor involving the Uyghur ethnic minority and others.
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The U.S. bans most imports from the region under the Uyghur Forced Labor Prevention Act. The letter to car companies cited a recent report from the U.K.’s Sheffield Hallam University that found evidence that global auto makers were using metals, batteries, wiring and wheels made in Xinjiang, or sourcing from companies that used Uyghur workers elsewhere in China.
According to that report, some car manufacturers “are unwittingly sourcing metals from the Uyghur region.” It said some of the greatest exposure comes from steel and aluminum parts as metals producers shift work to Xinjiang to take advantage of Chinese government subsidies and other incentives.
The U.S. ban on products linked to Xinjiang has already caused disruptions in the import of solar panels made there.
China has called Washington’s claim baseless. It disputes claims by human-rights groups that it mistreats Uyghurs by confining them in internment camps, with Beijing saying its efforts are aimed at fighting terrorism and providing vocational education.
Besides
Tesla
and GM, the letter signed by Finance Committee Chairman
Ron Wyden
(D., Ore.), was sent to
Ford Motor Co.
,
Mercedes-Benz Group AG
,
Honda Motor Co.
,
Toyota Motor Corp.
,
Volkswagen AG
and
Stellantis
NV, whose brands include Chrysler and Jeep.
GM said its policy prohibits any form of forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.
“We actively monitor our global supply chain and conduct extensive due diligence, particularly where we identify or are made aware of potential violations of the law, our agreements, or our policies,“ the company said.
A Volkswagen spokesman said the company investigates any alleged violation of its policy, saying “serious violations such as forced labor could result in termination of the contract with the supplier.” A Stellantis spokesperson said the company is reviewing the letter and the claims made in the Sheffield Hallam study.
Other companies didn’t immediately provide comments.
“I recognize automobiles contain numerous parts sourced across the world and are subject to complex supply chains. However, this recognition cannot cause the United States to compromise its fundamental commitment to upholding human rights and U.S. law,” Mr. Wyden wrote.
The information requested includes supply-chain mapping and analysis of raw materials, mining, processing and parts manufacturing to determine links to Xinjiang, including manufacturing conducted in third countries such as Mexico and Canada.
General Motors says its policy prohibits forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.
Photo:
mandel ngan/Agence France-Presse/Getty Images
The lawmakers are also asking the auto makers if they had ever terminated, or threatened to terminate, relations with suppliers over possible links to Xinjiang, and if so, provide details of the cases.
The committee’s action comes as the Biden administration and bipartisan lawmakers increase their focus on alleged forced-labor practices in China as a key component of their confrontation with Beijing over its economic policy. The United Auto Workers has called on the auto industry to “shift its entire supply chain out of the region.”
The State Department has said more than one million Uyghurs and other minorities are held in as many as 1,200 state-run internment camps in Xinjiang. Chinese authorities “use threats of physical violence” and other methods to force detainees to work in adjacent or off-site factories, according to the department.
The U.S. Customs and Border Protection investigated 2,398 entries with a total value of $466 million during the fiscal year ended September, up from 1,469 entries in the previous year and 314 cases in fiscal 2000.
Analysts expect the CBP’s enforcement activity to further increase this year, with a strong bipartisan push for a tougher stance on the forced-labor issue.
The researchers at Sheffield Hallam University found that more than 96 mining, processing, or manufacturing companies relevant to the auto sector are operating in Xinjiang. The researchers used publicly available sources, including corporate annual reports, websites, government directives, state media and customs records.
plans to cut potentially at least half of its workforce next week, people familiar with the matter said, as it scales back efforts to build and test autonomous truck-driving systems.
A staff reduction of that size would likely affect at least 700 employees, the people said. As of June, TuSimple had 1,430 full-time employees globally. It has operations in San Diego, Arizona, Texas and China.
The retrenchment follows a dramatic series of events, including the removal of the chief executive in October after a board investigation concluded that TuSimple had shared confidential information with a Chinese startup. TuSimple faces multiple federal investigations into its relationship with the Chinese startup, Hydron Inc.
TuSimple President and Chief Executive
Cheng Lu,
who previously held the CEO job and returned to the position in November, said on Friday, when asked for comment on the planned layoffs, that he intended “to right the ship, and this includes ensuring the company is capital efficient.”
The company plans to scale back significantly its work on building self-driving systems and testing self-driving trucks on public roads in Arizona and Texas, the people familiar with the matter said. As part of the downsizing, much of TuSimple’s operation in Tucson, Ariz., where it does a lot of its test driving, will be eliminated, and the team that works on the algorithms for the self-driving software will be pared back significantly, the people said.
TuSimple will focus on building out a software product that matches self-driving trucks with shippers that have freight to haul, with the aim of offering freight transport at a lower cost than human-driven trucks, the people said.
This month, TuSimple and Navistar International Corp. said they had jointly ended a two-year-old partnership. TuSimple had planned to incorporate its self-driving systems into Navistar trucks that would be sold to freight haulers starting in 2025. TuSimple doesn’t build trucks itself.
Employees have been bracing for the layoffs. Early this month, Mr. Lu sent an email to staff that said management was reviewing “our people expenses, the biggest part of our cash burn,” according to a copy viewed by The Wall Street Journal. He advised employees “to focus on the work at hand.”
TuSimple, based in San Diego, told employees this week that offices would be closed Tuesday and Wednesday, the people said. The job cuts are expected to be announced on Tuesday, they said.
TuSimple is cutting costs and scaling back its ambitions as it reels from a string of crises this year, including a crash of one of its self-driving trucks in April, the loss of key business partnerships, two CEO changes, a plummeting stock price and concurrent government investigations. Federal authorities are probing whether TuSimple improperly financed and transferred technology to Hydron, the Journal reported in October.
TuSimple has struggled to generate significant revenue as its technology remained in a testing phase; in the first half of the year, it reported $4.9 million in revenue on $220.5 million in losses. That revenue largely came from hauling freight for shippers in trucks while keeping a human driver behind the wheel. In recent weeks, some of those partners, including McLane Company Inc., have moved to distance themselves from TuSimple, according to people familiar with the matter.
“McLane is aware of the recent leadership, operational and route changes at TuSimple and is in communication with their team. We are in the process of assessing the business relationship with TuSimple and will determine the next course of action in due time,” said Larry Parsons, McLane’s chief administrative officer.
In October, following a board investigation and the day after the Journal reported that the Federal Bureau of Investigation, Securities and Exchange Commission, and Committee on Foreign Investment in the U.S., or Cfius, were investigating TuSimple, the company’s board fired then-CEO
Xiaodi Hou.
After being ousted, Mr. Hou joined forces with fellow co-founder Mo Chen, who is also the leader of Hydron, to fire the board. Together they brought Mr. Lu back to run the company. Mr. Chen now controls the company with 59% of the voting power, while Mr. Hou has 30%, according to securities filings.
Last month, accounting company KPMG LLP said in a letter to the SEC it had resigned as TuSimple’s auditor as a result of the board firing, which also involved dismissing TuSimple’s audit committee.
TuSimple has announced leadership changes in an effort to get back into compliance with regulators and public stock market rules. This included adding two independent board directors and a security director to its board. Cfius had required the security director role as part of a national-security agreement with the company, but TuSimple fired the previous security director.
TuSimple’s stock closed at $1.54 on Friday, a 75% decline over the past two months and down 96% from its 2021 initial public offering price.
Write to Heather Somerville at heather.somerville@wsj.com
a self-driving trucking company, said Monday it had fired its chief executive and co-founder,
Xiaodi Hou.
The San Diego-based company said in a news release and securities filing that its board of directors on Sunday had ousted Mr. Hou, who was also the board chairman and chief technology officer.
Mr. Hou was fired in connection with a continuing investigation by members of the board, the release said. That review “led the board to conclude that a change of Chief Executive Officer was necessary,” the company said in the release.
The securities filing said that the board’s investigation found that TuSimple this year shared confidential information with Hydron Inc., a trucking startup with operations mostly in China and funded by Chinese investors. The filing also said that TuSimple’s decision to share the confidential information hadn’t been disclosed to the board before TuSimple entered into a business deal with Hydron.
TuSimple said it didn’t know whether Hydron shared, or publicly disclosed, the confidential information, the securities filing said.
Messrs. Hou and Chen didn’t immediately respond to a request for comment.
Mr. Hou’s termination was announced the day after The Wall Street Journal reported TuSimple and its leadership, principally Mr. Hou, faced investigations by the Federal Bureau of Investigation, Securities and Exchange Commission and Committee on Foreign Investment in the U.S., known as Cfius, into whether the company improperly financed and transferred technology to a Chinese startup, according to people with knowledge of the matter.
TuSimple’s stock plunged more than 44% Monday. Shares in the company are down more than 90% for the year.
Investigators at the FBI and SEC are looking at whether Mr. Hou breached fiduciary duties and securities laws by failing to properly disclose TuSimple’s relationship with Hydron, the China-backed startup founded in 2021 by TuSimple co-founder Mo Chen that says it is developing autonomous hydrogen-powered trucks, the Journal reported. Federal investigators are also probing whether TuSimple shared with Hydron intellectual property developed in the U.S. and whether that action defrauded TuSimple investors by sending valuable technology to an overseas adversary.
The Journal also has reported that the board in July began investigating similar issues, including whether TuSimple incubated Hydron in China without informing regulators, the TuSimple board or its shareholders, said other people familiar with the matter. A June business presentation from Hydron viewed by the Journal named TuSimple as Hydron’s first customer, and said TuSimple would purchase from Hydron several hundred hydrogen-powered trucks equipped with self-driving technology. A TuSimple spokesman said the company has considered an agreement to buy freight trucks from Hydron but isn’t a Hydron customer.
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TuSimple’s securities filing on Monday said that TuSimple employees worked for Hydron and were paid, earning less than $300,000. The board wasn’t aware of this nor had members approve it, the filing said. Mr. Chen, who founded and leads Hydron, is TuSimple’s largest shareholder, owning about 11.8% of the company, according to FactSet.
Mr. Hou’s dismissal follows months of upheaval at the company, including the departures of its chief financial officer and chief legal officer and a sharp drop in its stock price. Much of the turmoil began when Mr. Hou took over as CEO in March, said former employees.
In April, one of TuSimple’s autonomous semi trucks crashed on an Arizona freeway. The accident revealed safety and security problems at TuSimple that former employees said leadership had dismissed, the Journal reported in August.
The company said
Ersin Yumer,
TuSimple’s executive vice president of operations, will serve as interim CEO while the board searches for Mr. Hou’s successor. Mr. Yumer previously worked on autonomous-vehicle technology at
Aurora Innovation Inc.,
Uber Technologies Inc.
and Argo AI, the autonomous-driving venture partly owned by
Ford Motor Co.
and
Volkswagen AG
that was shut down recently. Independent board director
Brad Buss,
the former chief financial officer at SolarCity Corp. and Cypress Semiconductor Corp., will be chairman, TuSimple said.
TuSimple said it would release its third-quarter earnings on Monday after the market closes. The earnings release was previously scheduled for Tuesday. The company, ahead of the results, said it remained on track to meet the full-year guidance disclosed in August, including ending the year with a cash balance of about $950 million.
Write to Heather Somerville at heather.somerville@wsj.com and Kate O’Keeffe at kathryn.okeeffe@wsj.com
A few years from now, in addition to deciding your next vehicle’s make and model, you may have another tough choice: the Google model or the
Apple
AAPL -3.00%
one? Other options may include “car maker generic” and even, I’m spitballing the name here:
Amazon
Prime Edition.
Now that cars, especially electric ones, are becoming something like smartphones on wheels, some of the dynamics that played out in the early days of the mobile industry are playing out in the auto industry. Competition between the two kingpins of the smartphone industry has in the past couple of years gained new momentum, with Google racking up auto-maker partnerships for the automobile-based version of its Android operating system, and Apple teasing plans to expand its software capabilities in the car.
For the car companies involved, which face the nearly impossible challenge of producing software on par with what tech companies offer, working with Silicon Valley can address consumer desires while also staving off competition from companies like Tesla. And yet there is an inherent tension in these partnerships over who controls the user experience and the valuable data produced.
Taken together, these forces mean that every car maker is having to navigate a delicate balance between doing things in-house and signing partnerships that cede control, and potentially some sources of revenue. These choices are leading to a vast and confusing new ecosystem in which “mobile” device refers to the car, and not just the phone. Until now, consumers didn’t need to care about what software was running in their car, but increasingly, they may.
For the average driver, this could mean cars that operate with much more familiar, and functional, software. But it may also extend the limited choice that now exists in the duopoly of smartphone operating systems, with implications for later selling a vehicle, or switching to a different smartphone ecosystem. Imagine car listings that say “60k miles, runs great, supports up to Apple CarOS v 3.1, sorry Android users, get an iPhone already!!”
Google’s head start
To understand what’s happening to the tech that controls our cars, Google’s aggressive moves are a good place to start.
Software increasingly controls most aspects of our cars, from driver-assist systems maintaining the vehicle’s speed and heading on the highway to the code and computers that assure the car comes to a stop when we step on the brakes—or the car does the braking for us.
But the auto-operating system competition so far centers on the infotainment system that shows us everything from maps to movies on the road.
Google and Apple both have systems—called Android Auto and CarPlay—that mirror phone apps on vehicles’ displays.
Google has gone further. In 2017, it announced Android Automotive (yes, the name is very similar), which is an operating system installed in the vehicle itself that controls its built-in infotainment system, rather than just displaying a version of a phone’s screen. Android Automotive is the thing that turns the screens in many new vehicles into what is more or less an Android-powered tablet that runs Android apps customized for cars. Auto makers can also license Google’s own apps and services, like Maps and Assistant, through an arrangement it calls Google Automotive Services, although this is optional.
Android Automotive can do much more than Android Auto, by gathering all sorts of data from other parts of the car, like its speed, battery status, heating and air conditioning, and pretty much anything else an auto maker wants to make available to Google’s software.
Apple’s next-generation CarPlay software will allow drivers to customize the look of instrument clusters on their vehicle in the same way they can change faces on the Apple Watch.
Photo:
Apple
Android Automotive replaces the often less-than-great customized software that car makers have in the past put on their vehicles’ infotainment systems. For example,
Ford’s
widely derided Sync infotainment system started as a partnership with
Microsoft,
until Ford switched to
BlackBerry’s
QNX unit in 2014. Last year, Ford announced it would be switching infotainment-software providers again, this time to Google’s Android Automotive, starting with cars sold next year. In 2020, the first vehicle running Android Automotive went on sale in the U.S.—the Polestar 2, from Volvo’s electric-vehicle unit.
To date, Google has announced partnerships with nearly a dozen auto makers and auto-parts suppliers, including
Stellantis,
Honda,
BMW,
Renault-Nissan-Mitsubishi and General Motors’ GMC and Chevrolet brands. Other auto makers have announced they are using Android Automotive, which is open source, without entering partnerships with Google, including electric-vehicle startups like Lucid Motors.
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What auto makers get out of using Android Automotive is a ready-made operating system for their cars maintained by a company with the resources to continually update that software, taking care of small but important details like staying current with new wireless standards. And what Google gets out of this arrangement is that it makes it easier for the company to offer its services on a wide variety of vehicles, says Haris Ramic, who has led Google’s Android Automotive team since it started in 2015.
This also means more people using Google’s services, like Maps or its Assistant. Nearly everyone who buys one of the hundreds of millions of vehicles that are slated to run Android Automotive will, from the perspective of its user interface and the apps that can run on it, be buying an Android smartphone with wheels.
Apple isn’t standing still
The software transformation of cars is still in its early days, and it’s hard to predict how it will play out. But one possible outcome is that many auto makers will end up offering cars with infotainment systems built by Google or Apple that have little modification by the auto maker, says Kersten Heineke, a Germany-based partner at McKinsey who consults with automotive clients.
Several major auto makters have said they plan to use Qualcomm’s chips in future vehicles.
Photo:
Qualcomm
Apple hasn’t announced an equivalent of Android Automotive—that is, software that auto makers can license to run on their vehicles, whether or not an iPhone is connected to them. And as with all its future plans, the company is very guarded about what it says publicly.
However, a demo of the next generation of its iPhone-mirroring CarPlay software in June at Apple’s developers conference, including renderings of the interface of a future vehicle, points to much deeper, and even perhaps Android Automotive-level integration with cars in the future. Some analysts have taken to calling Apple’s hypothetical future in-vehicle software “CarOS.”
Apple has announced more than a dozen launch partners for the next generation of CarPlay, starting with models that go on sale in 2023, including Volvo, Ford, Honda, Renault, Mercedes and Porsche.
For Apple to license its software to auto makers would be almost unprecedented in the history of the company. Apple has long focused on controlling both hardware and software in its devices. On the other hand, failing to offer something like a CarOS to compete with Android Automotive could put Apple at the mercy of Google in hundreds of millions of automobiles, since Google will control the operating system on which Apple’s CarPlay phone-mirroring software runs. Currently, some Volvo and Polestar vehicles can run Apple’s CarPlay on Android Automotive, but this is a much shallower integration than acting as the actual operating system running parts of the car.
In its June presentation, Apple showed off new CarPlay software taking over the instrument cluster of a vehicle, including gauges like speed, RPM and charge status.
Such displays of instruments and driving-critical systems generally have to be deeply integrated—physically, in terms of the hardware that controls them—into a vehicle to meet international safety standards for vehicles, says Isaac Trefz, a former software engineer at BMW and now product manager at OpenSynergy, which makes software that helps the computers in cars juggle all the different things being asked of them.
It’s likely that Apple has found some kind of compromise with auto makers in which manufacturers build their systems so they can take on some of the work required to make next-generation CarPlay work, according to
Chris Jones,
an automotive-market analyst at Canalys. In any event, the next CarPlay represents a much deeper level of integration than Apple has asked of auto makers in the past, he adds.
While some auto makers might balk at what are likely to be Apple’s strict requirements for how they make next-generation CarPlay available in their vehicles, the sheer weight of customer demand—there are after all close to a billion iPhone users worldwide—has clearly forced some to work with Apple on Apple’s terms, says Mr. Jones.
Here comes everybody
At the same time, many manufacturers are building their own operating systems to control their cars. Volvo is an illustrative case. The company runs Android Automotive on its infotainment centers, and keeps it separate from VolvoCars.OS, the software developed in-house to stitch together all the systems of the vehicle, says David Holecek, director of digital experience at Volvo Cars, which is owned by China’s Zhejiang Geely Holding. All of that runs on an assortment of hardware from traditional auto-parts makers, and newer entrants like
Nvidia
and
Qualcomm,
depending on the vehicle make and model, he adds.
Some auto makers, like Lucid, have opted to combine Android Automotive with Amazon’s Alexa assistant. Stellantis, which owns 14 automotive brands, including Jeep, Chrysler, Maserati and Alfa Romeo, uses Android Automotive on some of its vehicles, and in January announced a partnership with Amazon to make a variety of that company’s services available in vehicles.
“The way we think about this is that we want to develop our own software going forward,” says
Yves Bonnefont,
chief software officer at Stellantis. “We decided we want to own our future in terms of software development.” Even so, Stellantis sees partnerships with companies like Amazon—and its use of customized versions of the Android Automotive operating system—as a way to save time and resources, and focus on creating unique software experiences in its vehicles, tailored to the kinds of customers each attracts.
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This hodgepodge of software and systems will remain the norm for some time, says Mr. Heineke of McKinsey. There are just too many safety-critical systems in cars, and too many new features—like in-dash entertainment and ever-more-sophisticated driver assist—for one company to do it all, even if that company is Google, Apple or Amazon. On top of that, no one has any idea what the future of these systems will be in a world in which all three of these companies might be trying to displace the personal car as we know it with robotaxis—courtesy of Google-related Waymo, Amazon-owned Zoox and whatever Apple is working on.
However this plays out, it won’t happen nearly as quickly as the mobile ecosystem battles of yore did, among iOS, Android and Fire Phone—remember that?
“The automotive industry is very conservative,” says Mr. Trefz, a veteran of decades of designing hardware and software-based systems that control cars. “So if someone says, ‘This is going to happen in the next five years,’ it’s probably more like 20.”
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Write to Christopher Mims at christopher.mims@wsj.com
Ford Motor Co. shares dropped more than 4% in the extended session Monday after the company said inflation and parts shortages will leave it with more unfinished vehicles than it had expected, reminding Wall Street supply-chain snags are far from over for auto makers.
Ford
F,
+1.43%
said it expects to have between 40,000 and 45,000 vehicles in inventory at the end of the third quarter “lacking certain parts presently in short supply.”
The auto maker also said that based on its recent negotiations, payments to suppliers will run about $1 billion higher than expected for the quarter, thanks to inflation. The company reaffirmed its outlook for the year, however.
Ford’s warning “is evidence that auto parts shortages and supply-chain issues are still ongoing,” CFRA analyst Garrett Nelson told MarketWatch.
Many investors had started to believe “these problems were in the rearview mirror with inventories starting to recover from the record lows of the last year or so,” Nelson said.
The unfinished vehicles include high-demand, high-margin models of popular trucks and SUVs, Ford said. That will cause some shipments and revenue to shift to the fourth quarter.
“Ironically, Ford may have become a victim of its own success in that its recent U.S. sales growth has outperformed peers by a wide margin,” Nelson said. Its third-quarter production “apparently wasn’t able to keep pace with demand.”
Ford reiterated expectations of full-year 2022 adjusted earnings before interest and taxes of between $11.5 billion and $12.5 billion, despite the shortages and the higher payments to suppliers, it said.
Ford called for third-quarter adjusted EBIT of between $1.4 billion and $1.7 billion.
Shares of Ford ended the regular trading day up 1.4%. The company has embarked on a reorganization to pivot to electric vehicles, and last month confirmed layoffs in connection with its new structure.
Ford is slated to report third-quarter financial results on Oct. 26, when it said it expects to “provide more dimension about expectations for full-year performance.”
Analysts polled by FactSet expect the auto maker to report adjusted earnings of 51 cents a share, which would match the third-quarter 2021 adjusted EPS, on revenue of $38.8 billion.
The quarterly sales would compare with $35.7 billion in revenue in the year-ago period.
Shares of Ford slid 4.4% after hours, and have lost 28% so far this year, compared with losses of 18% for the S&P 500 index
SPX,
+0.69%.
The news comes a week after FedEx Corp.
FDX,
+1.17%
roiled markets and raised fears of an economic slowdown by withdrawing its outlook for the year and warning that the year was likely to become worse for the business.
Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.
Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.
Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.
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When or how do you expect companies to recover from their losses in Russia? Join the conversation below.
The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant
McDonald’s Corp.
expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee;
Exxon Mobil Corp.
took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer
Anheuser-Busch InBev SA
took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.
“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”
The financial fallout of the conflict isn’t significant for most multinationals, in part because of the relatively small size of the Russian economy. Fewer than 50 companies account for most of the $59 billion tally. Even for those, the Russian losses are typically a relatively small part of their overall finances. McDonald’s, for example, said its Russia and Ukraine businesses represented less than 3% of its operating income last year.
Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company
AerCap Holdings
NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.
Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major
BP
PLC’s $25.5 billion accounting charge on its Russian holdings last month included writing off $13.5 billion of shares in the oil producer
Rosneft.
The company hasn’t said how or when it plans to divest its Russian assets.
BP’s $25.5 billion accounting charge on its Russian holdings include writing off $13.5 billion of shares in oil producer Rosneft.
Photo:
Yuri Kochetkov/EPA/Shutterstock
Even some companies that are retaining a presence in Russia are writing down assets. The French energy giant
TotalEnergies
SE took a $4.1 billion charge in April on the value of its natural-gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they have to disclose Russian-related losses clearly, and that they shouldn’t adjust revenue to add back the estimated income that has been lost because of Russia.
Bank of New York Mellon Corp.
, which in March said it had stopped new banking business in Russia, appeared to breach this guidance when it reported its results for the first three months of this year. The New York custody bank in April reported $4 billion in revenue under one measure that included $88 million added to reflect income lost because of Russia.
A BNY Mellon spokesman declined to comment.
Investors appear to have mixed reactions to the write-downs, partly because most multinationals have relatively small Russian exposure, academic research suggests.
Financial markets are “rewarding companies for leaving Russia,” a recent study by Yale School of Management found. The share-price gains for companies pulling out have “far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets,” the researchers concluded.
Bank of New York Mellon said earlier this year that it had stopped new banking business in Russia.
Photo:
Gabriela Bhaskar/Bloomberg News
Research using a different methodology found a more subtle investor reaction. Analysis by Indiana University professor Vivek Astvansh and his co-authors of the short-term market impact of more than 200 corporate announcements revealed a marked trans-Atlantic divide. Investors punished U.S. companies for pulling out of Russia, and non-American companies for not withdrawing, the analysis found.
More write-downs and other Russia-related accounting charges are expected in the coming months, as companies complete their planned departures from the country.
British American Tobacco
PLC, whose brands include Rothmans and Lucky Strike, said on March 11 it had “initiated the process to rapidly transfer our Russian business.” That transfer is still ongoing, according to a BAT spokeswoman. BAT hasn’t taken an impairment in relation to the business.
Accounting specialist
Jack Ciesielski
said companies might hold off announcing a write-down until they have a good handle on how big the loss will be.
“You don’t want to put a number out there until you’re confident that it’s not likely to change,” said Mr. Ciesielski, owner of investment research firm R.G. Associates Inc.
The ruble’s recovery is helping Russia prop up its economy and continue its Ukraine war effort. WSJ’s Dion Rabouin explains how Russia boosted its ailing currency and how it is affecting the global economy. Illustration: Ryan Trefes
Many companies are giving investors rough estimates about what to expect on Russia-related losses.
The manufacturer
ITT Inc.,
which has suspended its operations in Russia, said last month it expects a $60 million to $85 million hit to revenue this year because of a “significant reduction in sales” in the country. That is a small slice of the $2.8 billion in total revenue for the maker of specialty components for the auto, aerospace and energy industries.
As sanctions weaken the Russian economy, businesses still operating there are reassessing their future earnings and booking losses. Ride-sharing giant
Uber Technologies Inc.
in May took a $182 million impairment on the value of its stake in a Russian taxi joint-venture because of forecasts of a protracted recession in the Russian economy. Uber said in February it was looking for opportunities to accelerate its planned sale of the stake.
—Thomas Gryta and Nick Kostov contributed to this article.
Bank of America Corp. said Tuesday it would cut overdraft fees to $10 from $35 beginning in May, following other big banks that have rolled back or ditched such charges.
Overdraft fees, which are charged when customers don’t have enough cash in their accounts to cover their purchases, are under scrutiny by regulators and politicians who say they unfairly exploit cash-strapped families. Under the Biden administration, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency have pressed banks to scale them back. In a December report, the CFPB flagged Bank of America, JPMorgan Chase & Co. and Wells Fargo & Co. on their overdraft fees.
plans to invest more than $3 billion to make electric vehicles in Michigan, people familiar with the matter said, a potential win for the car maker’s home state after recent commitments of auto projects to Southern states.
GM is finalizing plans for two electric-vehicle projects in Michigan. One would convert its Orion Assembly plant in suburban Detroit to serve as its hub for production of electric pickup trucks, the people with knowledge of the plans said. The renovation would cost at least $2 billion and would be expected to create more than 1,500 jobs at the factory, which today is lightly used, the people said.
Also, the auto maker intends to build a battery-cell factory near one of its assembly plants in Lansing, Mich., the people said. That project, involving a 50-50 joint venture between GM and its battery partner, LG Energy Solutions, would split more than $2 billion between GM and LG and create around 1,200 jobs, the people said.
GM officials are in talks with local governments to secure tax abatements and other approvals for the projects, and the plans could fall through or be altered, the people said.
“GM is in the initial stages of developing a business case for a potential future investment at several locations, including the Orion Township area,” the Detroit-based company said in a statement Friday. “We are having discussions with the appropriate local officials on potential incentive opportunities.”
GM shares rose about 6% Friday, closing at $63.21.
Auto makers are rushing to secure future battery supplies as the industry prepares to roll out dozens of new plug-in models over the next few years. Electric vehicles accounted for only about 4% of U.S. vehicle sales this year through November, and about 8% of global sales, according to an investor note Friday from
Credit Suisse.
But sales are growing rapidly as auto makers introduce new models and governments around the world tighten restrictions on tailpipe emissions. Credit Suisse said it now expects electrics to account for 24% of new-vehicle sales globally by 2025, up from a previous forecast of 17%.
Toyota Motor Corp.
plans to spend $1.25 billion on a new battery plant in rural North Carolina, according to a public-incentives deal approved Monday.
Ford
Motor Co. in September said it would invest more than $11 billion to build three battery plants, two in Kentucky and one in Tennessee, near Memphis, along with an electric-truck plant, its first new U.S. assembly plant in decades.
The planned GM investments would be notable for Michigan, especially after
Gov. Gretchen Whitmer
expressed disappointment that the state wasn’t selected for Ford’s projects. Her office declined to comment on potential future projects.
General Motors plans to phase out nearly all of its gas and diesel vehicles by 2035. Leading that transition is the first fully electric Cadillac. WSJ’s Mike Colias visited a GM testing site for a ride and an exclusive interview with GM’s President Mark L. Reuss. Photo Illustration: Alexander Hotz
Much of the recent surge in electric-vehicle investment has gone to Southern and Western states, shifting the center of gravity away from the auto industry’s traditional stronghold in the Upper Midwest.
In addition to Toyota and Ford’s recent moves,
Volkswagen AG
has ramped up electric-vehicle production at its factory in Chattanooga, Tenn. Polestar, the electric-vehicle company owned by Chinese car maker Zhejiang Geely Holding Group Co., is making cars in South Carolina. Tesla has said it aims to begin producing vehicles at its new factory in the Austin, Texas, area by the end of the year.
Some high-profile electric-vehicle startups also are based outside the Midwest, including
Lucid Group Inc.,
which recently began making cars at its factory in Arizona.
GM’s investment would be part of its $35 billion spending spree on electric and autonomous vehicles through 2025. The auto maker has said it eventually wants to surpass market-leader Tesla in U.S. sales of electrics.
The battery factory planned for Michigan would be the third for GM’s joint venture with Korea’s LG. The joint-venture company has looked outside GM’s home state for the other factories: one in Ohio, set to open next year, and another under way in Tennessee.
GM, which has long had excess factory space in the U.S., plans to convert existing plants to build electrics instead of gas- or diesel-powered cars, though in some cases it will make both in the same facility, executives have said. The company has said it will save at least $10 billion through 2030 by revamping factories rather than building new ones.
“We can leverage and go faster because of the existing [factory] footprint that we have,” GM Chief Executive
Mary Barra
said Thursday during an event hosted by the Automotive Press Association.
Ford, which has less unused factory space in the U.S. than does GM, is taking a different approach with its plans to build electric-vehicle facilities from scratch.
It is building the factory near Memphis on a massive site that also will house a battery plant. It also recently built a smaller plant near its Dearborn, Mich., headquarters to make electric F-150 pickup trucks.
Bell’s Brewery, one of the most iconic craft brewers in the U.S., is being acquired by a unit of global beverage conglomerate Kirin Group, adding to the long list of beer-industry consolidation in recent years.
Founder Larry Bell, who started the brewery in Kalamazoo, Mich., in 1985, is retiring and said Wednesday he is selling the company to Australia-based Lion Little World Beverages , which is owned by Japan’s Kirin
2503,
+0.85%.
The move will put Bell’s under the same corporate umbrella as Colorado-based New Belgium Brewery, which sold to Lion in 2019.
“This decision ultimately came down to two determining factors,” Bell said in a statement. “First, the folks at New Belgium share our ironclad commitment to the craft of brewing and the community-first way we’ve built our business. Second, this was the right time. I’ve been doing this for more than 36 years and recently battled some serious health issues. I want everyone who loves this company like I do to know we have found a partner that truly values our incredible beer, our culture, and the importance of our roots here in Michigan.”
The price of the deal was not disclosed, and no major changes or layoffs are expected for the time being. “Beer drinkers should expect no changes to Bell’s current beers,” the company added.
Bell’s Executive Vice President Carrie Yunker will continue to lead day-to-day operations, and will report to New Belgium Chief Executive Steve Fechheimer.
“In Bell’s, we see a likeminded group of people dedicated to making the world’s best beer — doing business in a way that improves the wellbeing of the people who power our success,” Fechheimer said in a statement. “We couldn’t be happier to welcome the entire Bell’s team.”
Bell’s is best known for its Two Hearted IPA, which in 2020 was named best beer in America for the fourth straight year by the American Homebrewers Association magazine Zymurgy. That same survey ranked Bell’s Hopslam the No. 5 beer, and Bell’s as the best brewery in America.
After enjoying boom years and rapid expansion in the late 2000s, the craft beer industry has sharply pulled back over the past decade, suffering from oversaturated markets, slower sales and competition from hard seltzers. Lion bought New Belgium, maker of Fat Tire, nearly two years ago for an undisclosed price, and Japan’s Sapporo Holdings Ltd.
2501,
+0.13%
bought San Francisco’s Anchor Brewing, which billed itself as the oldest craft brewer in the U.S., in 2017 for about $85 million. In 2019, Boston Beer Co.
SAM,
-2.99%
bought Delaware’s Dogfish Head Brewery for about $300 million, and Anheuser-Busch InBev SA
BUD,
bought Kona Brewing Co. and Redhook Brewery in a deal valued at more than $200 million.
