Toyota is seeing its sales go from bad to worse as supply chain issues take hold, EV startup Lordstown Motors saw its first ever profit, and Boeing workers at three U.S. plants agreed on a new contract. All that and more in The Morning Shift for August 4, 2022.
1st Gear: Toyota Sales Drop 42 Percent
It’s a tough time to be a carmaker, as supply chain issues, lockdowns caused by the pandemic and the threat of a recession linger over us all. For Toyota, this triple-pronged assault has hit its sales. Hard.
After seeing a 30 percent drop in volume sales in 2021, the automaker has now reported a 42 percent drop in profits for the first quarter of its latest fiscal year. Clearly, things are going from not great to substantially worse for the Japanese firm. According to Reuters:
“Toyota Motor Corp’s profit slumped a worse-than-expected 42% in its first quarter as the Japanese automaker was squeezed between supply constraints and rising costs.
“Operating profit for the three months ended June 30 sank to 578.66 billion yen ($4.3 billion) from 997.4 billion yen in the same period a year ago, Toyota said on Thursday, capping a tough period. It has repeatedly cut monthly output goals due to the global chip shortage and Covid-19 curbs on plants in China.”
The scale of its plummeting profits was “far beyond expectations.” Despite bringing new models to the market this quarter, like the electric BZ4X, rising production costs and parts shortages had a big impact on the firm’s sales.
Toyota claimed that rising material prices have cost it 315 billion yen ($2.36bn).
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But the carmaker doesn’t think these bad fortunes will be around forever. A spokesperson for Toyota told Reuters that production would pick up in the second half of the year. The company also stuck to its forecast for full-year operating profits and reaffirmed its ambitions to produce 9.7 million vehicles this financial year.
2nd Gear: Lordstown Motors Reports its First Profit
But while Toyota was witnessing a dramatic drop in income, an unlikely EV maker had posted its first ever profit. Troubled startup Lordstown Motors reported a profit in the first quarter of this year after it sold assets including its Ohio assembly line to Taiwanese contract manufacturer Foxconn. Reuters reports:
“The EV company recorded a gain of more than $100 million in the April-June quarter from the Ohio asset sale, which was prompted by the need for funding amid industry-wide supply chain disruptions and rising material costs.
“That helped it post a net income of $63.7 million, compared with a loss of $108.2 million a year earlier.”
The EV maker claims its all-electric Endurance pickup truck will definitely, maybe, make it into production later this year. But earlier this year, the automaker warned that it was burning through cash at an alarming rate.
In 2021, Lordstown Motors had $587 million in reserve, with which it was developing and building the all-electric truck. But by March this year, that figure had fallen to just $203.6 million. The sale of its Ohio plant to Foxconn was thought to offer a short-term boost to the firm as it neared the final hurdles of getting its truck on the road.
3rd Gear: Subaru Is Doing Fine, Actually
Lordstown Motors wasn’t the only car maker with something positive to share this morning. Japanese firm Subaru saw its profits rise 24 percent in its latest quarter as the company “recovered lost production, ramped up sales and cashed in on favorable exchange rates,” according to Automotive News.
The site reports that Subaru’s operating profit reached ¥37 billion ($271.3 million) in the fiscal first quarter ended June 30. Subaru said this rise was as a result of rising sales as it “gradually overcame crimped production from the Covid-19 pandemic and global semiconductor shortage.” From Automotive News:
“Global output increased 12 percent to 205,000 vehicles in the April-June period, helping drive a 12 percent increase in worldwide sales to 196,000 vehicles. The rebound helped Subaru gain its footing after struggling to fill the product pipeline amid strong demand for its products.
“The biggest boost to Subaru’s earnings, however, came from a windfall from the Japanese yen’s dramatic weakening against foreign currencies, especially the U.S. dollar.”
As the firm’s fortunes continue to rebound following the struggles of the pandemic, Subaru CFO Katsuyuki Mizuma has also quashed talk of recession in the U.S. Mizuma claimed that demand for Subaru vehicles “remains robust” in America, and said the company was “racing to fill some 50,000 back orders” over here.
Mizuma warned that limited output remains Subaru’s biggest hurdle.
4th Gear: Toyota Will Buy Back Your EV
Earlier this year, Toyota made a big song and dance about its first EV, the BZ4X, which was produced in partnership with Subaru. The electric SUV has proven pretty popular, and Toyota has so far delivered almost 3,000 to customers in the U.S. But, its rollout has been hit with issues, and now the company is offering to buy back vehicles affected by a recall.
After just two months on sale, Toyota announced a recall of the BZ4X thanks to faulty wheels, which it said could come off the car while you’re driving. Not a great start to Toyota’s battery-powered future.
Now, according to Electrek, the firm is offering to buy back faulty models as its recall continues to falter. The site says:
“Toyota announced the bZ4X recall in late June, citing a potential for the new EV’s wheels to fall off. Though it did apply to all bZ4Xs produced, since it happened soon after the car’s launch, it is still a relatively small recall – only 2,700 vehicles.
“Now owners are getting letters from Toyota corporate detailing the specifics of what Toyota is offering in exchange for the trouble of this recall, and given the scope of the offer, it doesn’t seem like the recall is going great.”
The letter, seen by Electrek, asks owners not to drive their EVs while Toyota seeks a remedy to the issue.
While it investigates a fix, Toyota will store recalled vehicles and offer loaner cars to affected customers. The automaker will also reimburse fuel costs for the loaned car, and will even repurchase the vehicle if you don’t like the sound of its solutions.
Electrek says the problem also affects Subaru’s Solterra, but it is not believed that deliveries of this model have started in the U.S. yet.
5th Gear: Boeing Workers Agree New Contract
Just weeks after threatening strike action, Boeing workers at three U.S. factories have called off industrial action and agreed a new contract. More than 2,500 workers at the aerospace giant’s sites in the Midwest voted to ratify a contract that their union said will raise pay by “an average of 14 percent over three years and add inflation adjustments.”
The Associated Press reports that members of the International Association of Machinists and Aerospace Workers at Boeing plants in St. Louis and St. Charles, Missouri, and Mascoutah, Illinois, agreed to the contract earlier this week. According to the site:
“The union said the new contract includes a provision from the rejected deal that calls for company contributions of up to 10% to employees’ 401(k) retirement plans, and it added a $8,000 lump-sum payment that can go into the employee’s account. It also has improvements for sick leave and parental leave, and makes no changes to the workers’ health insurance plans, according to the union.”
The sites in question center around Boeing’s military operation. While the firm has struggled to fill order books for its commercial jets amid the ongoing pandemic, its defense and space business has been booming.
The AP reports that through the first six months of this year, this sector accounted for about 38% of Boeing’s total revenue.
Reverse: This Happened
Neutral: I’m Hungry
I feel like I’ve not yet tapped the full potential of America’s snack market. I was driving over the weekend and took some cheesy popcorn, peanut butter cups and grapes out on the road with me, but I’m not sure they’re very good driving snacks. What do you stock up on before hitting the roads?