Chip shortage disrupts GM and Ford production

Pras Subramanian joins Brian Sozzi and Seana Smith to discuss the rollback in production for Ford and GM vehicles as the chip shortage continues to disrupt normal manufacturing for automakers.

Video Transcript

SEANA SMITH: The chip shortage is taking a significant hit to automakers, GM and Ford now saying that they're further scaling back some of their production because of that chip shortage. We want to bring in Pras Subramanian to help us figure out exactly what this means for the auto industry. And I guess, Pras, the big question is how significant of a setback is this for both GM and Ford?

PRAS SUBRAMANIAN: I think it's fairly significant. This is a big-- kind of a big problem for them because we thought the situation was getting better and it's not, right? So, starting with GM, they're going to idle eight plants in September. It's going to affect production of really popular cars like the Silverado, the GMC Acadia, other SUVs like the Traverse, the Enclave, and also to Cadillac SUV. So that's a big deal because these are the most popular cars that GM offers. Turning to Ford now, they're going to start making pickups with their KC plant for two weeks. They're going to idle two other truck plants too.

And this is not good for Ford because Ford had the worst one of their worst August ever. Sales are down 33% compared to two years ago in 2019. We all saw Toyota slashed global production by 40% in September. And also, Tesla in China also had to idle production for a few days, according to report, because of component shortages. You know, I really think that this is a promise accelerating for the car makers. We thought was going to get better and it's not.

And a dealer friend of mine told me, just this week, that he wanted to sell his wife's Range Rover Sport and he might get a better deal after the lease because of the fact that there's fourth 2000 Range Rover Sport sitting in the UK with no chips in them just waiting to get delivered.

BRIAN SOZZI: Yeah, the situation is getting pretty out of hand there, Pras, and I'm just looking at the stock prices here over the past three months. Ford shares down 13%, GM shares down almost 20%, so the market is clearly positioning for some potential third quarter and fourth quarter earnings misses from these companies, so I it from that standpoint. But, Pras, to your point, from a consumer standpoint, if these automakers are not making vehicles, they're scaling back production, really, prices to consumers are likely only to head even higher from here, no?

PRAS SUBRAMANIAN: Yeah, you know, we thought that within the last couple of months, we've been looking at like CPI data that used car prices were coming down. But if you ask me, it seems like I'm going to go back up in the fall as we're not going to see a lot of new models come because of the fact that the automakers can't make them. So if you can't actually produce these new models and due to attrition in the fall-- that's when the new models come out, you're going to used car prices creep back up again. And I think that's a problem for consumers.

And Sozzi, I know you're going to talk to Antonio Neri, HPE's CEO later today on our show. And I think he also warned about the fact that they can't produce enough chips.

BRIAN SOZZI: He did, Pras. Yeah, I'm looking forward to catching up with Antonio really calling out last night the supply shortages are impacting his business and his outlook. But, you know, just on autos too, Pras, I just caught you on Instagram last night. You were testing the new Bronco. Apparently, Ford was able to, at least, produce a Bronco to get it to you for a test drive. How do you like it?

PRAS SUBRAMANIAN: Yeah, you know, Sozzi, they like to help us out every now and then. But, yeah, I actually had it for a couple of days so far. The new Bronco is very comparable to the Wrangler. I think it might be better in some ways, and not as good in some ways, but it's a big truck, and I think it's going to be a solid competitor for the Wrangler coming up.

SEANA SMITH: All right, Pras Subramanian, as always, thanks so much for helping.