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Ford (F) & General Motors (GM) Production Hit Amid Supply Woes

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Ford Motor (F - Free Report) and General Motors (GM - Free Report) have announced in separate statements that they will halt production next week at Michigan facilities due to a scarcity of parts.

Auto biggie Ford said it would stop production at its Flat Rock Assembly Plant, which manufactures the Mustang, next week due to the global semiconductor shortage. Its remaining North American plants will be functional during this period.

Last month, the situation led Ford to halt production at its Kansas City assembly plant that builds F-150 pickup vehicles for a week. Moreover, F had already alerted last month that the persisting chip shortage would lower vehicle volumes in the current quarter.

Automaker GM has decided to cancel production next week at the Lansing Grand River assembly due to a temporary part shortage not related to the chip crisis. The plant builds the Cadillac CT4, Cadillac CT5 and Chevrolet Camaro.

GM is also planning for a two-week production hiatus at an assembly plant in Fort Wayne, IND, a site that builds the Chevrolet Silverado 1500 and GMC Sierra 1500 pickup trucks, beginning Apr 4 due to the long-drawn semiconductor chip shortage.

However, GM's Silao Assembly in Mexico, where the Sierra and Silverado light-duty trucks are also built, is not affected. Heavy-duty trucks at Flint Assembly and Oshawa Assembly in Ontario will be produced between Apr 4 and Apr 11.

The auto industry has been battered by a global chip shortage triggered by the pandemic, compelling companies to reduce production. So far this year, till the end of last week, the industry has lost more than 1.2 million units of planned vehicle production globally, according to forecasting firm AutoForecast Solutions.

Due to the crisis, Ford’s 2021 wholesale volumes declined 6% year over year. It expects first-quarter 2022 wholesale volumes to witness high single to low-digit declines due to supply shortages related to the Omicron shutdown and semiconductor crunch. Low vehicle production amid parts shortage and manufacturing constraints will affect revenues, especially in the first half of 2022.

The shortage of microchips is hindering the firm's operations and will weigh on GM's near-term prospects, especially in the first half of 2022. High commodity costs, including platinum group metals and steel prices, will play a major spoilsport. General Motors expects headwinds from commodity inflation and logistical challenges to be around $2.5 billion higher from the 2021 levels. These headwinds are expected to be more conspicuous in first half of the year.

Key Picks

Some better-ranked players in the auto space are Harley-Davidson (HOG - Free Report) and Tesla (TSLA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Harley-Davidson has an expected earnings growth rate of 2.2% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 28.1% upward in the past 60 days.

Harley-Davison’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 77.6%. The stock has lost 1.4% over the past year.

Tesla has an expected earnings growth rate of 44% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 4.3% upward in the past 60 days.

Tesla’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 33.3%. The stock has soared 62.8% over the past year.