Sweden’s Volvo AB (OTC: VLVLY) expects to take two to four weeks of manufacturing downtime this quarter as a shortage of microchips worsens.
Ironically, a strike by 2,900 workers at Volvo’s only manufacturing plant in North America could help the company move chips to other plants and forestall downtime. The first United Auto Workers walkout at the Volvo Trucks North America plant in Dublin, Virginia, since 2008 began last Saturday. No talks are expected until next Monday at the earliest.
“The global supply chain for semiconductors remains very unstable and the uncertainty about the development is high,” Volvo Group President and CEO Martin Lundstedt said in a statement. “We therefore cannot rule out further disruptions in both the truck business and other parts of the group.”
Solid Q1 recovery
The shortage of semiconductors, used throughout the trucks, buses and construction equipment Volvo builds, had minimal impact on first-quarter financials reported Thursday.
Net sales increased by 3% to SEK 94 billion ($11.17 billion) compared to 91.4 billion SEK ($10.87 billion) last year.. Adjusted operating income of SEK 11.82 million compared to a loss of SEK 7,14 million a year ago. The record adjusted operating margin of 12.6% compared to a negative 7.8%.
Earnings per share amounted to SEK 4.35 (52 cents) compared with a per share loss of SEK 2.30 (27 cents) in the first quarter of 2020.
Global employment was basically flat at 98,982. But there was a shift to more hiring of blue-collar manufacturing workers and a shedding of white-collar positions.
Truck sales and orders skyrocket
Truck deliveries globally increased 17% year-over-year to 52,444 units. The operating margin in the truck business nearly doubled to 12.8% compared to 6.8% a year ago as the global pandemic was beginning to shut down manufacturing. New truck orders globally jumped 123% to 85,461.
In North America, orders soared 369% to 22,215 versus 4,732 in the year-ago period. Volvo-branded trucks orders rose 139% and Mack Trucks surged 263%. Production backlogs for both brands grew as supply chain constraints, including microchips, slowed the ability to complete truck assembly.
“Our inventories of both new and used trucks are low globally,” Lundstedt said.