Ford's Truck Woes Spell Opportunity for GM and Fiat Chrysler

A massive fire that devastated an auto supplier plant in Michigan earlier this month is starting to snarl production for Ford Motor (NYSE: F), General Motors (NYSE: GM), and Fiat Chrysler (NYSE: FCAU). All three U.S. automakers are currently racing to mitigate the impact of parts shortages on their output.

However, Ford faces a much greater challenge than either of its rivals. It has been forced to stop virtually all production of its F-Series trucks -- which account for 37% of Ford's U.S. deliveries and nearly all of its profit -- due to parts shortages caused by the fire. This will help GM and Fiat Chrysler shore up their sales in the pickup market without resorting to massive discounts.

Ford gets hit hard by shortages

The Meridian Magnesium Products plant that caught fire on May 2 builds lightweight radiator support structures for Ford's F-Series trucks, among other products. Fortunately, none of the tooling was damaged during the fire, which will limit the long-term impact of this disruption. However, there are no alternative suppliers to pick up the slack while Ford waits for Meridian to get back to normal production levels.

As a result, while Ford was able to continue building F-Series trucks for the first several days after the fire, it had to halt production of all F-150s earlier this week. One of two plants building Ford Super Duty trucks also had to shut down.

F-Series production at the idled plants won't restart until May 14 at the earliest. However, Ford executives have acknowledged that they face a fluid situation and don't know when they can expect a return to normal production. In a worst-case scenario, the supply interruption could last for several weeks.

Ford has an 84-day supply of F-Series inventory, so even a multiweek shutdown shouldn't have a big impact on retail sales. Ford is also maintaining its full-year EPS guidance. That said, full-size trucks come in numerous different configurations, so having less inventory could lead to a modest amount of lost sales if dealers don't have exactly what customers want. Furthermore, it could take months for Ford to recover the lost production through overtime.

General Motors and Fiat Chrysler may have gotten lucky

GM and Fiat Chrysler also use parts built at Meridian's Michigan plant. Parts shortages have forced General Motors to halt output of its Chevrolet Express and GMC Savana full-size vans, while Fiat Chrysler has had to pause production of the Chrysler Pacifica minivan.

However, whereas Ford sells more than 70,000 F-Series trucks in a typical month, the impacted GM and Fiat Chrysler products are far less popular. Year to date, Fiat Chrysler has delivered an average of just over 10,000 Chrysler Pacificas per month. The General's two van models combined sell at an even slower pace.

Additionally, the plants that build the Pacifica, Express, and Savana also work on other products. Thus, Fiat Chrysler has been able to shift production to the older Dodge Grand Caravan minivan while it waits to restart Pacifica production. Meanwhile, General Motors is ramping up production of its Chevy Colorado and GMC Canyon midsize trucks.

Good timing for Ford's rivals

Both General Motors and Fiat Chrysler are set to introduce new full-size truck models later this year. For now, Ford has a fresher full-size truck lineup than either of its top rivals. As a result, it has been gaining market share in the segment during 2018.

GM and Fiat Chrysler have been fighting back by offering bigger discounts on their trucks to keep sales volumes up until the new models arrive. They can afford to do this because of the massive profit margins they earn on truck sales.

Still, both automakers would prefer to offer smaller discounts. Even relatively modest shortages of F-Series trucks over the next few months could give GM and Fiat Chrysler the breathing room they need to maintain their market share with smaller discounts. Higher pricing on full-size trucks could also help GM sell more of its Colorado and Canyon midsize trucks.

Ford may be able to recover its lost F-Series production during the second half of the year. But by year-end, Fiat Chrysler and General Motors will have all-new truck models in the market and will be in much better position to compete against Ford.

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Adam Levine-Weinberg owns shares of General Motors. The Motley Fool recommends Ford. The Motley Fool has a disclosure policy.