Auto Production Was Slowed By Parts Shortages After Terrorist Attacks

Autoparts Report,  Sept 25, 2001  

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The ripple effect of tightened security at U.S. borders forced many auto parts and auto assembly facilities to temporarily stop production. Border traffic tie-ups and the clampdown on air freight resulted in occasional parts shortages following the attacks in New York and Washington. Increased security at U.S. borders in the wake of the air attacks caused traffic delays stretching as long as 15 hours at points, industry officials said.

"There are times when things start flowing smoothly, and then they bog up again," said a General Motors Corp. spokesman. Other auto and auto parts makers echoed that problem. Jim Michie, a spokesman for U.S. Customs, said the border patrol is on "Alert Level One" which calls for a "sustained, intensive anti-terrorism" effort. That includes careful examinations of all vehicles crossing the border. That can cause long delays, he said, but the agency is adding personnel to help ease the strain.

The auto industry has had an especially tough time shipping parts across the U.S.-Canadian border between Michigan and Ontario, which accounts for the bulk of vehicle production in North America. Also affecting the industry was the lockdown of air travel and recent limited flights allowed across the U.S.

Toyota Motor Corp. said that due to a parts shortage, it was forced to suspend production at its Georgetown, Kentucky assembly plant, for a short time. A number of other companies also said that they experienced interruptions in their assembly operations and that the aftermath of the attacks combined with a softening market would further hurt third quarter results.

Intermet Corp. slashed third-quarter financial expectations, blaming the slowing economy and lower vehicle output as a result of the terrorist attacks. The Troy, Michigan-based maker of powertrain, chassis/suspension and structural components for the auto industry said it expects to lose $2.5 million to $3 million, or 10 cents to 12 cents a share in the third quarter on sales of less than $200 million.

SPX Corp. said that its third quarter results are at risk based on the negative business impact the terrorist events had on its subsidiary, Inrange Technologies. Inrange said that it expected quarterly results for the period ending September 30, 2001 will be below previous guidance due to the business impact of the attacks. Inrange expects its third quarter revenues to be between $55 and $63 million and, if airfreight shipments of international orders continue to be delayed, revenues could fall below this range by an additional $4.0 million. This would reduce SPX third quarter earnings by as much as $0.15 per share.

Visteon Corp. revised its third quarter earnings estimates in light of the announcement by Ford that it would take 110,000 to 120,000 units out of the third quarter North American production schedule. Visteon now expects to post an after-tax loss of $60-70 million, excluding restructuring charges.

"Although we've been able to hold our forecast until now, there is no way we can contain this level of reduction this late in the quarter," said Michael Johnston, President and Chief Operating Officer. "In the Second Quarter, when industry production schedules were sharply reduced, we were able to take actions to reduce controllable costs and stay on target. In that case, however, the production cuts came much earlier in the quarter. We are taking every action to minimize the impact of this latest cut, but cannot accommodate this level of disruption in this timeframe."

Visteon noted that despite the difficulties in border crossings and air freight, it has been able to meet all of its production commitments to Ford. Visteon is not providing guidance for full year results at this time, citing the high degree of economic and auto sales uncertainty.

General Motors Corp., also saw its stock fall when it said its outlook for the remainder of the year was unclear.

As with cars, analysts saw demand falling for several other items amid an overall decline in consumer confidence. "In the short term, consumer spending will be impeded by the desire to stay close to family, friends and TV sets and many businesses will hold back on capital spending and hiring new workers," wrote Goldman Sachs analyst Abby Joseph Cohen.

COPYRIGHT 2001 Ron DeMarines
COPYRIGHT 2008 Gale, Cengage Learning