Automotive News Canada - December 2021 - 28

28
* DECEMBER 2021
Vehicles delayed at Vancouver port can't
get to B.C. dealers or the rest of Canada
BRITISH
CONTINUED FROM PAGE 1
port, was to open Dec. 20 to commercial traffic.
Much of the Trans-Canada Highway is expected
to remain closed for some time. Highway 3
is open to essential traffic only.
Most dealerships in the affected areas have
avoided flood damage, said Blair Qualey, president
of the New Car Dealers Association of BC.
MORE CHALLENGES FOR DEALERS
Murray Chevrolet-Buick-GMC, just a few
blocks from the flood zone in the central-B.C.
city of Merritt, was forced to close temporarily
under an evacuation order imposed Nov. 15.
Several other dealerships were affected, with
staff unable to reach their workplaces.
" The biggest challenge has been access for
their employees and also for their customers, "
said Qualey, whose association represents
more than 390 franchised dealers.
Richard Antonenko, general manager of
Murray Chevrolet-Buick-GMC, said he was
allowed back into the dealership Nov. 29, and
all staff returned by Dec. 7. But his
store has been able to offer only limited
service to customers because
parts supply is scarce.
General Motors, he said, " has
been working really hard on logistics "
to get parts to dealers.
New vehicles are also scarce.
Antonenko normally has 50 to 60
new vehicles in stock, but as of early
December he had just eight. Carrier
trucks have been unable to get
through from the Port of Vancouver,
where vehicles destined for the dealership
are stranded.
And with new vehicles in short
supply everywhere, " There are virtually
no dealer trades, " Antonenko
said.
Six customers who lost vehicles
in the flooding are awaiting replacements,
but Antonenko thinks that is
just the tip of the iceberg, because
many people have not yet been able
to tally their losses.
" You add these transportation
issues to the supply-chain issues
that our dealers have been facing,
it makes it especially challenging, "
Qualey said. " It has been incredibly
disruptive. "
COLUMBIA
AREA
OF DETAIL
Vancouver
Victoria
Abbotsford
WASHINGTON
3
100 kilometres
5
Kamloops
5
Merritt
97C
Vernon
Salmon
Kelowna
Penticton
Suppliers stuck between
a rock and rising costs
Arm
Revelstoke
CONTINUED FROM PAGE 1
ing concern and sharing rising
costs, while automakers are
" punishing " their suppliers.
" They're not reopening contracts, "
Volpe said. " They're
refusing to renegotiate the sharing
of some of those costs and
are being less than thoughtful
in how they handle release of
orders. "
JEFF MELNYCHUK/AUTOMOTIVE NEWS CANADA
Qualey: The
flooding has
added to the
supply-chain
disruptions
being faced
by the
industry.
FILE PHOTO
from the West Coast for distribution across
Canada. Backups at the Port of Vancouver
means dealers are having to wait even longer
for vehicles in an already inventory-constrained
environment - anywhere from an
additional 10 days to two weeks. "
While the vast majority of auto
parts supplied to Honda's and Toyota's
assembly plants in Ontario are sourced
in North America, some are imported
from overseas, and the port situation
has added costs, Adams said. Honda
and Toyota " are managing the supply
chain disruptions but are facing rising
costs as they find other ways of getting
parts to their plants, " although production
has not been affected.
SHAKEN SUPPLY CHAIN
Some automakers reported to
Automotive News Canada that the
flooding - on top of existing inventory
problems - caused significant
drops in November sales. Mazda slumped
nearly 47 per cent while Kia was down 34 per
cent.
PORT BACKUPS, LONGER WAITS
The disaster " has added cost and delays to
getting both parts to production facilities and
vehicles across the retail distribution network
in Canada, " said David Adams, president of
the Global Automakers of Canada, which represents
nondomestic brands.
" For our members, many bring in vehicles
Adams: With
the Port of
Vancouver
backed up,
dealers are
waiting longer
to receive
vehicles.
FILE PHOTO
Brian Kingston, president of the
Canadian Vehicle Manufacturers'
Association, which represents the
Detroit Three automakers in Canada,
said the auto sector had not seen an
immediate significant impact.
" However, given highly integrated
automotive supply chains in Canada
and across North America, extended
road and rail closures could pose challenges
in the coming weeks, " he said.
Philippe Crowe, spokesman for
Toyota Canada, said the automaker
adapted quickly to the ever-changing
situation in British Columbia.
" Our teams are monitoring closely,
and our main focus is the well-being
and safety of anyone impacted, including
Toyota employees and all citizens
impacted, " he said. " We are not in a
position at this point to comment on
impacts on the company. "
To save weeks of shipping time, Volvo Car
Canada recently changed the transportation
route of its XC60 midsize crossover and S90
luxury sedan - the brand's two models built
in China - to the Port of Vancouver from
Halifax. Deliveries have been affected by the
floods, said Paul Valentine, general manager of
Calgary-based Valentine Volvo.
" Those cars are delayed, and no new [estimated
time of arrival] has been shared with
us, " he told Automotive News Canada in a Dec.
2 interview. He has been told Volvo officials
expect the delay to be short-lived.
" We think that it will only be another week
or two. "
FIRST FIRES, NOW FLOOD
The latest disaster comes on the heels of the
wildfires that ravaged British Columbia over
the summer.
" First there were the fires; now there's the
floods, " Qualey said. " It's just relentless. "
B.C. Premier John Horgan declared a provincewide
state of emergency Nov. 17 amid the
crisis, which triggered landslides that killed at
least four people.
Volvo recently began importing the S90 and
XC60 to Canada via the Port of Vancouver.
" Those cars are delayed, and no new
[estimated time of arrival] has been shared
with us, " said Paul Valentine, general
manager of Calgary-based Valentine Volvo.
PHOTO: PORT OF VANCOUVER FACEBOOK PAGE
Some transport trucks carrying vehicles
were barred from the highways, which were
restricted to essential services only, Qualey
said. The B.C. dealers association was in contact
with the provincial Ministry of Transport
to try to ensure that vehicle deliveries were
allowed, he said. - ANC
CHIPS JUST THE TIP OF ICEBERG
Volpe pointed to the microchip
shortage as the root cause,
but the problems have
rippled outward from
there, he said.
" When that volume
disappears, it gets felt
all the way through the
supply chain; because if
they're not making cars
today, you're not making
seats, " he said. " And
if you're not making
seats, you're not buying
foam. And if you're
not making foam, then
you're not buying petrochemicals. "
From
APMA members,
Volpe said, he
" As you get further away
from the [automaker], it gets
harder and harder for us to
move those costs to the consumer, "
Azzopardi said. Laval
Tool works as a Tier 1, 2 and 3,
depending on what component
it is building.
Azzopardi's company has cut
costs where possible but with
tight margins even before the
crisis, it has slipped into the
red.
" We're losing money, " he
said. " There's no ifs, ands or
buts about it. "
PROTECTING PARTNERS
Automakers are also
subject to cost pressures.
Volpe:
Some
automakers
are not
reopening
contracts,
leaving
suppliers to
flounder.
FILE PHOTO
has repeatedly heard of orders
packed on trucks ready to ship,
only to have customers call and
cancel, adding fresh warehousing
and logistics costs. In many
other instances, low-volume
orders have created inefficiencies
at parts suppliers set up for
certain levels of production.
With demand for vehicles
continuing to outstrip supply,
automakers have been able to
pass some of their rising costs
on to consumers, Azzopardi
said. Parts suppliers do not have
that luxury, he said, adding that
the automakers he works with
have all " turned a blind eye. "
" They're basically saying,
'You're signed in for a price, and
that price is not negotiable until
the contract comes up again,
and you have to live with that
price, absorb it and make your
own changes to be able to manage
those increases.' "
SIZE DOESN'T MATTER
Big Canadian parts companies
such as Magna
International have seen their
margins tighten as well. In the
third quarter, for instance,
Magna posted an earnings
before interest and taxes (EBIT)
margin of 2.9 per cent, compared
with 8.5 per cent last year.
The chip shortage has lowered
volumes and led to unpredictable
production schedules,
cumulatively thinning margins,
said Magna CEO Swamy
Kotagiri.
" On top of these factors, we
have experienced inflationary
cost increases in production
inputs, including freight, commodities
and, to a lesser degree,
labour and energy costs, "
Kotagiri said on the company's
most recent earnings call in
November.
All suppliers are seeing the
effects, but Volpe and Azzopardi
said the squeeze is felt most at
Tier 3 - the level furthest from
the automaker, where raw materials
are processed before they
become auto parts.
General Motors, for
one, saw its adjusted
EBIT margin for North
America squeezed to
10.3 per cent in the third
quarter, down from 15
per cent for the same
period in 2020.
As the company
works through its supply
problems, it's also
trying to ensure that it
keeps its partners " in
business for the long haul, " said
GM Canada President Scott Bell.
" We certainly have our fair
share of challenges to face, but
you gotta do it together, or else
somebody's going to get left
out. "
The two other Detroit automakers
have suffered less
impact on margins.
In its third-quarter earnings
report, Ford Motor Co. posted
an adjusted EBIT margin for
North America of 10.1 per cent,
down from 12.5 per cent in the
same quarter last year.
Stellantis, which reports its
financials semiannually following
the merger of PSA Group
and Fiat Chrysler Automobiles,
said its margin for North
America reached a record 16.1
per cent in the first half of 2021.
With the merger only closing
this January, no previous period
is directly comparable.
In past crises such as the 2008
recession, Volpe said, automakers
were more willing to work
with suppliers. Now, some automakers
are putting profit ahead
of industry welfare, he said.
" If we're all going to come
out of this in a healthy sense, "
Volpe said, " being competitive
and being able to actually run at
full capacity when we get semiconductors
at the volumes that
are required, the [automakers]
have to do better. " - ANC
Bell: Wants to keep GM's
suppliers " in business for the
long haul. " FILE PHOTO
Automotive News Canada - December 2021

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