Auto suppliers raise Ford prices – and beyond

0

Auto industry suppliers are raising prices for their customers across the board, not just with Ford Motor Co, which this week warned it was facing an inflationary cost of $1 billion.

Several suppliers said Ford is not suffering alone as automakers at all levels are asked to shoulder more of the burden suppliers are facing due to soaring energy, labor and and raw materials. Suppliers contacted by Reuters said they had raised prices for parts in the range of 7% to 20%. “During this year, more and more suppliers have gone to their customers, demanding higher prices from automakers, said Andreas Weller, managing director of aluminum parts maker Aludyne.

“They tried to hold everyone back, but eventually the dam breaks and then you have to pay people,” he said of the automakers. Weller said that in Europe alone, natural gas and electricity prices are almost 10 times higher than they were two years ago thanks to Russia’s invasion of Ukraine, and even in the United States, these prices are five times higher. Add to that the tight labor market and the higher pay required to attract workers, and “there is no improvement in sight”.

That pressure was reflected in Ford’s warning on Monday that inflation-linked supplier costs would be $1 billion higher than forecast in the current quarter. Fear of rising costs caused shares of the Dearborn, Mich., automaker to post their biggest one-day decline in more than a decade on Tuesday. Ford’s warning also hit other stocks, not just automakers like General Motors Co and Stellantis, but also more broadly.

Bob Roth, co-owner of RoMan Manufacturing, a producer of glass molding transformers and equipment in Grand Rapids, Mich., said the only place his company has seen cost reductions recently is in lower prices for copper. “We won’t give it back until our arms are really twisted,” he said of the company’s price increases. In fact, the rapidly changing pricing environment has led RoMan to change its requirements so that customers only have 15 days to lock in contract prices from the 90 days it previously offered. Vitesco Technologies CEO Andreas Wolf said last week at the Detroit auto show that the maker of motor control units and electric vehicle charging hardware has passed on its increased costs to materials on car manufacturers.

“It’s clear that (automakers) have the ability to raise new car prices, we’ve increased on the materials side, (and) in many cases we’ve been able to give those increases to our customers,” he said. he declared. At the same time, Wolf said, Vitesco has teams monitoring providers in its own network that may be in financial trouble due to rising costs.

Many vendors can’t move fast enough, offering follow-on contracts that allow them to cut costs and accept lower profit margins when prices rise. “It’s hard to get out of this,” said Bill Berry, owner of Die-Tech & Engineering. “Our cost of raw materials has skyrocketed from a historical perspective.”

Berry has raised some prices, but is sensitive to foreign competition. Automakers have faced a series of supply chain issues over the past two years that have repeatedly delayed vehicle production, including shortages of semiconductor chips.

“Ford’s announcement shows we’re not off the hook yet,” Morgan Stanley analyst Adam Jonas said in a note. “It was only a matter of time before vendor cost recoveries started rolling in.” Suppliers say things are unlikely to change any time soon.

“This is the new economic reality and we will continue to fight for (financial) relief,” said Joe Perkins, CEO of Michigan engineering and machining firm Mobex Global.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

Share.

Comments are closed.