From US GM to German Volkswagen... Profits Plummet Amid Supply Shortage Challenges

[Asia Economy Reporter Jo Yujin] Following the US Big Two automakers General Motors (GM) and Ford, German automaker Volkswagen also reported poor performance due to supply shortages. Although the chip shortage situation is expected to ease somewhat in the fourth quarter, the outlook remains bleak as the company faces cost pressures from rising raw material prices.

According to CNBC in the US, The Guardian in the UK, and each company's IR materials on the 28th (local time), Volkswagen announced in its third-quarter earnings report that sales decreased by 4.1% to 56.9 billion euros compared to 59.4 billion euros in the same period last year. Net profit fell by 14.6% to 3.1 billion euros from 3.6 billion euros in the previous year.

Volkswagen cited the global semiconductor bottleneck as the reason for the decline in sales and profits. Chip supply significantly decreased due to the spread of the Delta variant in Southeast Asia, including Malaysia, leading to production cuts. As a result, sales volume in the third quarter dropped sharply by 24% to 1.97 million units from 2.61 million units in the same period last year.

Volkswagen stated that the semiconductor chip shortage was at its worst in the third quarter but expects gradual recovery in the fourth quarter. Herbert Diess, CEO of Volkswagen Group, said, "The third-quarter results once again show that we need to systematically pursue productivity improvements."

Earlier, GM and Ford, which announced their earnings the day before, also saw significant declines in third-quarter profits. GM's third-quarter net profit was $2.4 billion (approximately 2.8128 trillion KRW), down about 40% from $4 billion in the same period last year. Sales recorded $26.8 billion, a 25% decrease from $35.5 billion in the previous year.

Paul Jacobson, GM's Chief Financial Officer (CFO), said, "Although the chip shortage is expected to ease somewhat in the fourth quarter, we will face cost pressures due to increased spending related to the business shift toward becoming a fully electric vehicle company and rising raw material prices."

Ford's third-quarter net profit was $1.8 billion, down 25% from $2.4 billion in the same period last year. Sales recorded $35.7 billion, a 5% decrease from $37.5 billion in the previous year.

John Lawler, Ford's CFO, said, "The chip shortage remains fluid, but North American shipments have increased since the second quarter," raising this year's adjusted pre-tax profit guidance from $9 billion?$10 billion to $10.5 billion?$11.5 billion.

However, he warned that rising steel and aluminum prices are expected to cause a $1.5 billion cost burden next year and that inflationary pressures will broadly impact business activities in the coming year.

On the other hand, Tesla, which was the first among US automakers to announce earnings, overcame the semiconductor shortage and recorded sales records for six consecutive quarters. Tesla announced on the 20th that its third-quarter sales increased by more than 50% to $13.76 billion from $8.77 billion in the same period last year.

Due to strong earnings and a surge in stock price, Tesla's market capitalization exceeded $1 trillion on the 26th. Based on the closing price that day, Tesla's market cap was $1.042 trillion, about 12 times that of GM ($78.7 billion) and Ford ($61.9 billion).

This content was produced with the assistance of AI translation services.