On a bi-weekly basis, CAR welcomes our audience to decompress with our President and CEO, Carla Bailo, as she covers and shares her thoughts on the latest Hot Topics happening in the automotive industry. While the biweekly newsletter primarily covers four topics, this feature story previews two of the topics covered on April 29, 2022. If you would like access to the full newsletter for better insights into critical industry issues you and your organization are facing, sign up for our mailing list here.

HOT TOPICS 4/25/2022 – 4/29/2022

Q1 Earnings

• Ford sees first-quarter profit dragged lower by Rivian stake, but maintains 2022 earnings guidance
• GM earnings beat estimates as the automaker battles inflation, supply chain woes
• GM, Ford battle inflation, rising interest rates as they report Q1 results
• Volvo Cars beats profit expectations as strong demand persists
• Hyundai profit surges, favourable currency rates offset sales decline

Carla’s thoughts:

We sure are seeing a mixed bag of results in the earnings, and there are many reasons for some companies remaining profitable and others are not. In general, though companies are beating estimates, they are lower than they were in ’21. The year-end projections continue to be robust with the expected easing of supply chain woes. As we know, many companies are not predicting supply chain improvement until 2023, so by the 3rd quarter, we will have a much better idea of yearly projections.

Japanese and Korean companies are bolstered by currency fluctuations which may be short-lived, and therefore, caution should be abundant with the current situation.

Demand continues to go unabated as there are simply not enough products on the dealer lots – it will take some time to bring back the inventory. Depending on the impact of inflation on disposable income, demand may begin to wane as. This situation must be closely watched.

On the other hand, Dealers are jumping for joy and singing to the bank! The available vehicles are getting MSRP or above. However, again, I advise caution. You want customers to be loyal and appreciate the experience provided. Their business can never be taken for granted, and they must always be treated as such.

Sustainability

• GM Asks Suppliers to Sign Pledge Advancing Global Climate Action and Human Rights
• Solar, wind power projects in the works for Mercedes’ factories
• ESG Watch: ‘Writing is on the wall’ for U.S. companies with SEC’s tough new rules on reporting climate risk
• European carmakers should wean off fossil fuels by 2040, Audi chief says
• Aston Martin’s Racing.Green. strategy lays out sustainability goals

Carla’s thoughts:

Sustainability is forging ahead with lightning speed. These sustainability efforts are not just about what is coming out of tailpipes. Sustainability requires complete wheel to wells for a vehicle and beyond to buildings, social practices in sourcing, recycling of precious materials, and more. SEC just issued new rules requiring reporting of scope 1, scope 2, and even scope 3 emissions by 2024. I’m sure there will be several comments on this proposal, but most companies believe this is the right move by all.

Why do they feel this way? Transport is now the single source of the highest carbon emissions globally, and we are under the microscope. Global warming continues to worsen, as does the amount of garbage we put in our landfills and oceans. The waste problem will only worsen if we don’t consider battery recycling. And, Wall Street rewards those companies who announce and provide metrics toward ESG attainment.

At CAR, we recently held roundtables on this subject and invited several different companies to discuss their thoughts (and concerns) on ESG readiness and achievement. Since then, GM has announced to suppliers that they need to be on board with GM’s stance, and GM won’t be the first or only OEM to do so.

We understand that companies are initially confused about the elements to consider, what benchmarks should to use, and which metrics are meaningful to the SEC and investment community. The initial confusion is followed by concern about the potential cost to their business, upfront and potentially long-term. These changes in sustainability targets come at a time when many suppliers and sub-suppliers are cash strapped due to supply chain, geopolitics, and inflation post COVID.

CAR will be publishing results from these roundtable meetings and asking companies for their support to provide the information needed to the automotive community. CAR will be the one-stop shop with relevant information for your transformation for those seeking this knowledge. Stay tuned for more information, or reach out to us with your comments and ideas. We are invested in making this work so that our industry continues to be sustainable!

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