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Impact of supplier issues on the North American truck production

01 July 2021 Antti Lindstrom

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.

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