Auto Roundup: Updates From General Motors (GM) & Ford (F) at the Forefront
Major auto giants reported first-quarter 2022 vehicle sales numbers last week. Most of them suffered a double-digit decline in sales volumes. Overall, new vehicle sales declined more than 12% year over year for the January-March period due to escalating supply chain issues despite robust consumer demand. Sales plunged even more drastically in March as limited vehicle supply and tight inventories kept a lid on volumes amid compounded chip concerns over the Russia-Ukraine crisis. Per Cox Automotive, the seasonally adjusted annual rate for March declined to 13.09 million units from 14.1 million in February and 17.6 million in March 2021. More on this here: Do Dismal Q1 Sales Hint at Rough 2022 for U.S. Auto Market?
Auto giants Ford F and General Motors GM issued a recall of some of their models last week on issues related to damaged parts or certain features that compromise the safety of other drivers on the roads. The companies were also prompted to temporarily suspend operations in some of their factories amid a shortage of chips.
Automotive suppliers Magna International MGA and Meritor MTOR made news with the expansion of operations in Ontario and deal with Extreme Trailers, respectively. Auto retailer Penske Automotive PAG bolstered its position in the United Kingdom with the acquisition of three BMW MINI dealerships.
Recap of Last Week’s Major News
1. General Motors announced that it is setting up an organization called Commercial Growth Strategies and Operations to boost profitability, as it ramps up efforts to switch gears to electric. The new group will be responsible for GM Fleet, U.S. Sales Operations and EV Retail Innovation teams. The organization will be led by GM veteran executive Steve Hill, who has been the vice president (VP) of Chevrolet since November 2019. Scott Bell — currently the president and managing director of GM Canada — is set to replace Hill as the VP of Global Chevrolet. Marissa West — currently GM’s executive chief engineer for global midsize truck, medium-duty truck and van — will substitute Bell at GM Canada. These leadership changes are effective Apr 1, 2022.
In another update, General Motors issued a recall of more than 680,000 SUVs due to a snag in their windshield wipers resulting from wear and tear in the ball joints. The recall consists of 2014-2015 Chevrolet Equinox and GMC Terrain vehicles.
Meanwhile, General Motors also announced that it would cancel production at the Lansing Grand River assembly for one week ending Apr 10 due to a temporary part shortage. The plant builds the Cadillac CT4, Cadillac CT5 and Chevrolet Camaro. The auto biggie also declared a two-week production hiatus beginning Apr 4 at an assembly plant in Fort Wayne, IND, a site that builds the Chevrolet Silverado 1500 and GMC Sierra 1500 pickup trucks, due to the long-drawn semiconductor chip shortage.
2. Ford issued two recalls covering more than 737,000 vehicles to fix oil leaks and malfunctioning trailer braking systems. If unchecked, a housing that has cracked can cause oil leakage onto engine parts, which can cause a fire hazard. The oil leak recall consists of the Ford Escape SUV from 2020 through 2022 and the 2021 and 2022 Bronco Sport SUV with 1.5-Liter engines. Dealers will replace the housing if need be. Owners will be informed of the same starting Apr 18. The recalls for trailer brake failures include F-150 pickups from 2021 and 2022 as well as the 2022 F-250, 350, 450 and 550. They also include the 2022 Maverick pickup, Ford Expedition and Lincoln Navigator SUVs. A software glitch can prevent trailers from braking, enhancing the risk of a crash. As a corrective measure, dealers will update the brake control software. Owners will be informed of the same starting Apr 18.
In a separate development, Ford notified that it would stop production at the Flat Rock Assembly Plant, which manufactures the Mustang, for a week ending Apr 10 due to the global semiconductor shortage. Its remaining North American plants would be functional during this period.
Meanwhile, Ford unveiled the 2023 F-150 Rattler, a new off-road variant truck package. The Rattler will be based on the four-wheel-drive F-150 XL model, including some of the equipment found in the FX4 package like an electronic locking rear differential, hill descent control and shock absorbers tuned for off-roading. The Rattler will only be available as a SuperCab or SuperCrew and is scheduled for sale this fall.
3. Penske strengthened its footprint in the United Kingdom with the acquisition of three BMW MINI dealerships and a collision center. The acquired dealerships are located in South East England and North of London, which complement PAG’s existing 32 BMW MINI dealerships in the U.K. market. The acquisitions solidified Penske’s position as the biggest retail partner for the BMW and MINI brands in the United Kingdom.
The deal has been financed using the existing capacity under PAG’s U.K.-based credit facility. The buyout would add $250 million in annualized revenues for Penske. Year to date, Penske has added roughly $550 million to annual revenues via buyouts and open points. PAG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4. Magna announced that it is expanding operations to Chatham-Kent, Ontario, as part of an extension of its current operations in St. Thomas to support new business from Ford. Magna, which is focused on accelerating electrification strides, is leveraging its top-class body and chassis expertise to provide innovative battery enclosures. MGA’s investment in Chatham-Kent will be a springboard for growth.
The sprawling 170,000 square foot facility is supposed to create around 150 new jobs and manufacture battery enclosures for the Ford F-150 Lighting. This trailblazing offering would be the largest lightweight aluminum battery enclosure available in the market and the first on a work truck. Magna stated that commendable work by its employees at the Formet, St. Thomas facility has led to additional business for the company, allowing it to expand opportunities in Chatham to develop new technologies that have tremendous growth potential. Chatham-Kent is driven by green, innovative and futuristic technologies. Hence, Magna’s values complement it very well.
5. Meritor entered into a three-year agreement with Extreme Trailers, per which it will supply MTA™ and MTA-Tec6™ suspensions with its latest generation EX+™ LS single-piston air disc brakes and the Meritor Tire Inflation System (MTIS™). Meritor’s collaboration with Extreme Trailers will aid the automotive equipment supplier to launch MTA-Tec6. The latest offering demonstrates Meritor's commitment to innovation and technological advancement.
The MTA-Tec6 is Meritor's lightest-weight trailer suspension. The product will provide up to 23,000-pound capacity for tankers, flatbeds and other applications. MTA-Tec6 is equipped with a unique bolt-on lift kit, enabling seamless assembly and enhancing the application flexibility. Meanwhile, the MTIS would aid in keeping tires properly inflated to improve tire life and fuel economy.
Price Performance
The following table shows the price movement of some of the major auto players over the past week and six-month period.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Industry watchdogs will keep an eye on March auto sales in China, likely to be released by the China Association of Automobile Manufacturers soon. Further, stay tuned for how automakers make changes in operations in the light of increasing supply chain snarls.
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Ford Motor Company (F) : Free Stock Analysis Report
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