Impact of supplier issues on the North American truck production

Medium and heavy-duty truck (Class 4-8) OEMs in North America
have shown less impact from supplier issues and while certain
models were stopped for some time, nearly all productions remained
in operation in the second quarter of 2021. The expected volume in
the first half of the year was under-built by 3% and in the May
release IHS Markit forecasts that most of the OEMs will make up the
lost volumes by the end of the year showing an 8% increase (versus
previous edition), while others will roll over to 2022. Some OEMs
are also rolling off incomplete units from production lines that
are finished when parts are available.

The major challenge is the shortage of microchips and other
electronic components like display units, controllers, sensors,
processors. At the same time, though, issues have been rising with
the prices and availability of raw materials, such as steel,
aluminum, and certain chemicals, including those needed for seating
foam. Compared to light vehicles (Class 1-3), trucks and buses use
different components and the numbers are simply smaller in the
medium and heavy commercial sector (0.5 million) than the
consumer-oriented light vehicles (16 million).

The severe weather conditions this past winter which included
very rare snow and ice storms along the Gulf of Mexico caused
significant problems on the manufacturing and chemical industries
in the region. Nevertheless, even at the height of the storms in
February and March, the area’s truck plants did not shut down.

Late-March 2021, Daimler Trucks North America (DTNA) said it
would use “rotating downtime” at its medium-duty plants in Mt.
Holly, North Carolina, and Santiago, Mexico, because of the
materials shortages. The intent was to manage lower output levels
temporarily while avoiding shutting the plants completely down
until the situation improves or till the end of June. The lost
volumes would be made up as soon as possible, to avoid any
reductions in the total volumes for the year. By now, we understand
both plants have effectively returned to scheduled levels.

GM’s Chevrolet Express/GMC Savana work van came to a standstill
at their own Wentzville plant and slowed down significantly at the
Springfield plant where Navistar builds it for GM. Similar to that,
Ford halted the production of its Econoline work van and the
F53/F59 stepvan and motorhome chassis (Detroit Chassis Plant closed
for at least a month). Instead, the focus shifted to high-volume
light-duty vehicles such as the F-150 pickup truck (25-30k/month).
The medium-duty F-450-750 models, meanwhile, are being produced
with no major declines at Kentucky Truck and Ohio Assembly
Plants.

PACCAR, Volvo, and Navistar are also acknowledging issues in the
supply level affecting production, but each appears confident that
the issues can be resolved during the second half of the year.
Anecdotal evidence exists that vehicles are also built nearly
complete but being set aside to wait for final assembly of certain
parts later. How many units this involves exactly is difficult to
ascertain, but all seem to agree that the number is not
extraordinarily significant, probably anywhere from 5,000-10,000
total. The missing volumes (compared to ‘normal’ pace) are, again,
considered something each manufacturer feels fairly certain they
can make up for using slightly higher line rates later in the
year.

The only ‘physical’ stoppage comes from the two strikes at
Volvo’s New River Valley plant in Virginia. First in April, the
United Auto Workers (UAW) union struck for two weeks and returned
to work while contract negotiations continued. On 7 June, however,
the union declared the contract as unacceptable and went back on
strike. Any estimates of the second strike’s length are premature
at this point, but the timing places significant pressure to come
to a solution so that production can resume, considering the strong
market demand and high order volumes.

Stellantis’ Saltillo Truck plant in Mexico which makes the Ram
Class 4 and 5 versions, also has avoided any major impact, again
presumably thanks to the differences in product versus their
mass-market Ram 1500 which is built in the US, like the
Jeep-branded SUVs that are critical for the company in the consumer
market.

Navistar’s Escobedo plant in northern Mexico continues to build
large volumes, many of which are exported to the US. No major
slowdowns are apparent thus far in Mexico; in fact, the recovery
among all OEMs is very robust.

Overall, the North American truck production is expected to
rebound by nearly 24% from last year and continue into 2022,
contingent on availability of materials and manpower.

Source: http://ihsmarkit.com/research-analysis/impact-of-supplier-issues-on-north-american-truck-production.html