Stellantis says car chip shortage worsening, disruption could linger into 2022

Stellantis expects a global semiconductor chip shortage will take a bigger bite out of production in the second quarter and warned the disruption to the auto industry could last into 2022.

Carmakers across the world have had to curb output, hampering their attempts to recover from the Covid-19 pandemic, due to a shortage of vital chips used in everything from computer management of engines to driver assistance systems.

“We do expect it [the shortage] to improve in the second half, but clearly I think it would be naive to expect it to just disappear,” Stellantis’ chief financial officer Richard Palmer told reporters on Wednesday.

“It is possible that it will leak into 2022,” he added.

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The world's fourth largest carmaker, formed at the start of the year from the merger of Italian-American Fiat Chrysler and France's PSA, posted a 14 per cent increase in first-quarter revenue thanks to strong consumer demand and sales of its more profitable vehicles, sending its shares up 2.8 per cent.

Citi analysts described the results as “solid”, adding that “overall it seems likely that Stellantis profitability is running ahead of expectations.”

But production losses due to the chip shortage prevented a stronger rebound from industry-wide plant shutdowns in March 2020 to halt the spread of the pandemic.

Chip shortages cut around 11 per cent of Stellantis’ planned production in the first quarter.

Impact

The carmaker said it had limited visibility on the shortage’s impact on its full-year results, but said the second quarter would be worse before some improvement in the second half.

Ford Motor Co warned last week the shortage could halve its production in the second quarter.

Palmer told reporters the shortage was currently affecting eight of Stellantis’ 44 assembly plants but he said the disruption had not affected its integration plan, from which the group aims to deliver over €5 billion a year in savings.

“The synergy plan is very much on target,” Palmer said.

Stellantis reiterated its forecast for an adjusted operating profit margin of 5.5 per cent – 7.5 per cent this year.

The group said planned production launches, for Jeep’s new Grand Wagoneer and Wagoneer large SUV models scheduled for this quarter and for the next generation Grand Cherokee in the third quarter, remained on track.

Stellantis said its first quarter revenues rose 14 per cent to €37 billion on a pro-forma basis. That compares with analyst expectations of €34.9 billion, according to a Reuters poll. – Reuters