Toyota faces skyrocketing costs to build new cars

A photo of cars rolling off two production lines at a Toyota factory.

Photo: Toshifumi Kitamura/AFP (Getty Images)

Toyota won’t urge suppliers to cut component costs, Boeing employees agree to strike, and US automakers are struggling to fill vacancies. All this and more in The morning shift for July 25, 2022.

1st gear: Toyota

Eeverything becomes more and more expensive these days, because of inflation, or so economy people tell me. Jit’s not just for you and me, because carmakers also feel the pinch. Reuters reports that Toyota has decided not to ask its suppliers to lower prices as it tackles spiraling construction costs.

Despite agreements being in place to reduce the cost of components between July and September this year, according to Reuters that Toyota has not approached its suppliers to continue the business later in the year:

Toyota Motor Corp will not unilaterally pressure its suppliers for lower prices in the second half of its fiscal year and is also considering taking over their energy bills, an official said Monday.

The move reinforces the world’s largest automaker’s bid to shoulder more of the burden facing suppliers as global supply chain issues continue and fuel costs continue. energy soar.

Like other automakers, Toyota has been battered by global semiconductor shortages and COVID-19-related lockdowns, causing repeated cuts in vehicle production and frustrating suppliers.

Toyota initially sent a request for lower prices for the July-September period to some suppliers, but the company decided not to make a request to cover the October-March period because its production plan has yet to stabilize, said Kazunari Kumakura, Purchasing Manager of Toyota. group leader. He also did not apply for the April-June period.

The company said it was looking at ways to support its suppliers as energy and fuel costs continued to soar.

According to Toyota, supply chain issues and price spikes of raw materials weigh on its production costs. Earlier this year, the company warned that its hardware costs could “more than double” this year to 1.45 trillion yen ($10.64 billion).

This exorbitant cost is what led the company to initially approach suppliers to lower their prices between July and September of this year. But now it looks like the company is taking the hit in its annual profits instead. Either that or the cost of a new Toyota is about to skyrocket.

2nd gear: 2,500 Boeing workers must leave on Strike

Boing faces a strike at three of its US factories after workers voted against a new contract offered by the aircraft manufacturer. According to the Associated Pressabout 2,500 workers will go on strike from August 1 at Boeing manufacturing sites in St. Charles County, St. Louis County and Mascoutah, Illinois.

In a statement, the International Association of Machinists and Aerospace Workers District 837 union said, “We cannot accept a contract that is not fair and equitable as this company continues to earn billions of dollars every year on the backs of our hard-working members.”

In response to the proposed strike, the AP said Boeing had a “contingency plan” in place “to support business continuity.” According to the AP:

A Boeing spokesperson said the company’s contract offer included competitive raises and a generous retirement plan that included Boeing matching employees’ contributions to their retirement plan up to 10% of their salary.

Boeing is expected to provide an update on its finances this week when it releases its next quarterly earnings report on Wednesday. Earlier this year, Boeing reported a first-quarter loss of $1.2 billion, but just last week the company announced that Delta Air Lines had ordered 100 of its 737 planes.

3rd gear: car manufacturers are preparing for the recession

US automakers GM and Ford now face the unenviable task of convincing investors that all is well. According to Reuterstwo of the country’s biggest automakers are now scrambling to assure investors they can weather a “recession without slipping into the red”.

The site reports that analysts have cut production estimates and share price targets for both companies as they tackle the ongoing Covid-19 pandemic, supply chain issues and ” pessimistic outlook for the global economy”.

However, both automakers seem well positioned to deal with any other challenges they may face on the global stage. Unlike the 2008 recession, demand for new cars remains high. According to Reuters:

Some analysts say a recession could be mild and demand for vehicles could recover faster than in the past. A big difference from past downturns is that U.S. GM and Ford dealerships aren’t sitting on large inventories of unsold vehicles that would have to be pared down to sell.

We believe that the configuration on a multi-year horizon is more positive,” Bank of America analyst John Murphy wrote in a note, citing lean inventory and pent-up consumer demand that delayed purchases as vehicles became scarce and expensive.

Despite the challenges facing the two companies, GM said earlier this month that it expects the second quarter net profit of $1.6 billion to $1.9 billion, while Ford forecasts full-year operating profit could be between $11.5 billion and $12.5 billion.

4th Gear: Tesla will open a network of superchargers

One of the main selling points of a Tesla is access to its Supercharger network of public fast-charging stations. It’s undeniably great service, and one that makes life with a Tesla a little easier than other EVs. Oto one, only if you can see past all their other flaws.

NOTToday, this network of more than 1,200 charging points in 50 states could be open to regular electric vehicle drivers across America. According to the wall street journalTesla is trying to tap into public funding to build more electric vehicle charging points and open up part of the Supercharger network to electric vehicles made by other manufacturers, after a previous announcement from the White House this month. The WSJ reports:

The electric vehicle market leader is bidding for a portion of the billions of federal and state dollars that are up for grabs in the coming years as the Biden administration, automakers and many states try to accelerate construction of fast chargers along highways to reassure drivers that they can travel without fear of losing power.

Tesla already has a national network of fast chargers for its own drivers, but they are not available for other types of vehicles in the United States. For the past year, the company has said it plans to open its US network to others, although details on the timing and whether that will open existing stations or new ones have been scarce. Recent regulatory filings and other documents indicate that the company is seeking public funding that, if granted, would require other electric vehicle manufacturers to access the grid.

The company has already received $6.4 million to build loaders in rural California, and Documents filed at the White House that it will start building public charging stations for other electric vehicles by the end of the year.

5th Gear: US auto factories can’t find enough workers

Rising transportation costs and falling unemployment rates are making it harder for U.S. automakers to fill job vacancies at factories across the country. Now, a new report from Automotive News described the measures taken by companies to attract new workers.

According to Automotive News:

Automakers are forced to raise starting salaries on these once-coveted jobs just to stay ahead of other employers such as Amazon warehouses and fast-food franchises, as well as their own suppliers and manufacturers at proximity in other industries.

Labor shortages made it harder for automakers to replenish depleted dealer inventory and showed some of the downsides of building factories in remote locations.

“We’re looking under the rocks for people to go to work right now,” said Alex Sadler, who specializes in training and development for the Tennessee Valley Authority’s Economic Development Branch and has worked on developments for several builders. automobiles, most recently Ford Motor Co.’s Blue Oval City project.

Measures taken to try to bring workers back to auto plants include help with transportation costs, higher starting wages and even the addition of bonuses for workers who stay long-term. All of this is happening as companies attempt to increase production by expanding and replacing workers who have left in recent years.

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