Aptiv, a worldwide auto parts supplier, is preparing for another year of disruption in global car production, which will put the company's efforts to deploy people and technology to make its sprawling supply chain less sensitive to the elements to the test.
On Thursday, the business announced a 70% decline in third-quarter profit, owing to $55 million in expenditures connected to semiconductor shortages and the COVID-19 virus, as well as a 5% drop in overall sales due to fewer vehicle manufacturing.
Aptiv, whose customers include General Motors, expects the car sector "will not return to pre-pandemic production levels until post-2022," according to CEO Kevin Clark. The company did not provide a performance estimate for 2022.
By the end of the year, it expects expenditures attributable to supply chain interruptions and the pandemic to total $310 million.
The provider of automated driving systems and electric car wiring is relying on a central "supply chain resiliency team" that monitors data from up to 4,000 vendors to navigate supply chain turbulence. To anticipate problems, it has created a virtual, digital duplicate of its global supply chain and launched 100 projects to rethink items so they are not subject to a single supplier's shutdown, according to Clark.
In response to global trade difficulties, Aptiv began a more targeted effort three or four years ago to identify its suppliers and construct a digital map of its supply chain, according to Clark.
'BRUTE FORCE' is a phrase that means "brutal force."
When a winter storm knocked down petrochemical production in Texas earlier this year, the company's supply chain crisis teams and technologies were put to the test.
When it comes to resolving supply disruptions, Clark added, "we use a lot of sheer force."
According to him, Aptiv receives more than 2 million parts per day from 4,000 suppliers. These parts are shipped to more than 5,000 Aptiv customer locations via 125 Aptiv plants. Aptiv can monitor activity in its production system using sensors and scanners.
Semiconductor manufacturers want automakers to discuss longer-term production plans and keep to production volume promises to avoid future supply chain shocks.
"Production predictability is highly critical," Clark told analysts, adding that Aptiv intends to have "deeper connections" with a smaller number of major semiconductor suppliers.
Looking forward to the year 2022, Despite signs of stabilization in semiconductor output, Clark acknowledged there was still a lot of uncertainty. He believes that an increase in COVID-19, harsh weather or a natural disaster might have a large influence. "The system doesn't have any extra inventory."
Aptiv's net income for the quarter was $86 million, or 32 cents per share, down from $283 million, or $1.05 per share, a year ago.
Excluding items, the business earned 38 cents per share, which was slightly higher than analyst projections of 37 cents per share. According to Refinitiv statistics, net sales decreased marginally to $3.65 billion, slightly over predictions of $3.50 billion.