Chip shortage slows sales of auto parts maker Faurecia

The logo of French automotive supplier Faurecia is seen during the company’s investor day in Paris, France, April 19, 2016. REUTERS / Charles Platiau / File Photo

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PARIS, Oct.26 (Reuters) – French auto parts maker Faurecia (EPED.PA) on Tuesday reported a more than 10% drop in third-quarter sales as customers cut production due to a shortage world of semiconductor chips.

The group, which supplies car seats, dashboards and fuel systems, reported sales of 3.43 billion euros ($ 4 billion), up from 3.82 billion during from the same period of 2020. Its shares were down 1.9% to 41.52 euros at 08:38 GMT.

However, Faurecia said it has outperformed the industry as a whole, citing news provider IHS Markit’s October forecast that indicated a drop of more than 19% in global auto production.

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Automakers such as Renault (RENA.PA), Volkswagen (VOWG_p.DE) and Stellantis (STLA.MI) – some of Faurecia’s biggest customers – have slashed production targets due to the shortage, slowing demand for rooms.

Supply chain issues have held back efforts by automakers to recover from last year’s coronavirus lockdowns and shift to manufacturing electric vehicles.

In a call with analysts, CFO Michel Favre said the company was seeking compensation when customers “brutally” canceled orders with less than a day’s notice. He didn’t say what the answer was.

In addition to chip shortages, Favre said Faurecia also faces challenges from rising steel and plastics costs.

He added that the company had a “significant operational challenge” with its new operations in Detroit and Michigan, in large part due to difficulties in recruiting skilled workers, high staff turnover and rising wages.

Faurecia has reiterated its 2021 financial forecasts, even if conditions remain very difficult at the end of the year. It lowered its forecast in September following IHS Markit’s forecast of a global auto production deficit. Read more

Stifel analyst Pierre-Yves Quemener said the company’s annual turnover – guided to 15.5 billion euros – would depend on a resumption of production until the end of the year, although the cash flow forecast looked “secure”.

Last week, IHS Markit estimated that supply chain issues will cost the auto industry around 11 million vehicles this year. Read more

($ 1 = € 0.8593)

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Reporting by Sarah Morland; Editing by Subhranshu Sahu and David Holmes

Our standards: Thomson Reuters Trust Principles.

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