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October 26, 2021 02:52 AM

Faurecia's sales drop 10% on chips shortage

French supplier hit after automaker customers cut production targets

Reuters
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    PARIS -- Faurecia posted a more than 10 percent drop in third-quarter sales on Tuesday, as its customers cut production due to a global shortage of semiconductor chips.

    The French supplier, which supplies car seats, dashboards and fuel systems to automakers, reported sales of 3.43 billion euros ($3.99 billion), compared to 3.82 billion euros in the same period of 2020.

    "Market conditions remained tough in the past quarter, impacted by adverse supply chain conditions, primarily semiconductors," CEO Patrick Koller said in a statement.

    However, Faurecia said it outperformed worldwide automotive production, citing October forecasts from information provider IHS Markit that showed a more than 19 percent decline in global output.

    Automakers such as Renault, Volkswagen and Stellantis -- some of Faurecia's biggest customers -- have cut production targets due to the shortage, slowing demand for parts.

    The supply chain issues have slowed automakers' efforts to recover from last year's coronavirus lockdowns and shift toward making electric vehicles.

    In a call with analysts, finance chief Michel Favre said the company was asking for compensation when customers "brutally" cancelled orders with less than a day's notice. He didn't say what the response had been.

    On top of chip shortages, Favre said Faurecia was also facing challenges from rising costs of steel and plastics.

    He added that the company had a "significant operational challenge" from its new operations in Detroit and Michigan, largely due to difficulties in recruiting qualified workers, high staff turnover and rising salaries.

    Faurecia reiterated its 2021 financial guidance, even if conditions remain very challenging at the end of the year. It had cut its guidance in September after IHS Markit's forecast of a global shortfall in automotive production.

    Stifel analyst Pierre-Yves Quemener said the company's annual revenue -- guided at 15.5 billion euros -- would depend on a pick-up in production through the end of the year, though the cash flow guidance seemed "safe."

    Last week, IHS Markit estimated the supply chain problems would cost the automotive industry about 11 million vehicles this year.

    Faurecia ranks No. 8 on the Automotive News Europe list of the top 100 global suppliers, with worldwide sales to automakers of $17.59 billion in 2020.

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