{"text":[[{"start":12.15,"text":"Detroit carmakers have warned that the financial hit from higher commodity prices will rise to $5bn this year as the Middle East war strains the supply chains for materials from aluminium to plastics and paint. "}],[{"start":26.3,"text":"The Big Three US carmakers, General Motors, Ford and Jeep-owner Stellantis, all flagged commodities inflation as they reported first-quarter earnings, pledging to compensate with greater cost discipline."}],[{"start":39.15,"text":"They could be forced to cut vehicle discounts and raise prices if the conflict drags on for more than six months given their slim margins, according to analysts. "}],[{"start":48.8,"text":"“The war in Iran has raised our costs and its duration remains uncertain,” GM’s chief executive Mary Barra said in an earnings presentation this week. She added the group was reducing spending in other areas to counter the rise in oil and other commodity prices."}],[{"start":65.44999999999999,"text":"The Cadillac-maker estimated that commodity inflation — including logistics and higher DRam memory chip costs — could reduce its adjusted operating profit by up to $2bn this year, compared with its earlier forecast of up to $1.5bn. Ford also warned of supply chain costs of up to $2bn, a year-on-year increase of $1bn."}],[{"start":89.44999999999999,"text":"Stellantis, which owns Fiat, Peugeot and Chrysler, said it was mostly hedged against the commodity price increases during the first quarter but projected the impact could reach roughly €1bn ($1.2bn) in 2026."}],[{"start":104.99999999999999,"text":"The estimated $5bn in additional costs from commodity inflation means that its impact will be equivalent to the $6bn hit the carmakers expect from higher US tariffs. "}],[{"start":115.99999999999999,"text":"Since Donald Trump’s war with Iran disrupted global shipping by blocking the Strait of Hormuz, carmakers have been insulated from the immediate impact by fixed-price contracts with suppliers. "}],[{"start":127.49999999999999,"text":"But if the conflict lasts another two months, more suppliers are expected to push for new terms, with those higher prices coming through in about six months. "}],[{"start":136.89999999999998,"text":"“I think we are past the point where I would say, it’s just a glitch. Just a couple of weeks and it’s back to normal and we just compensate for that cost,” said Albert Waas, automotive partner at consulting firm BCG. "}],[{"start":148.79999999999998,"text":"The biggest pain point for the automotive industry has been aluminium, whose price on the London Metal Exchange has risen as much as 16 per cent since the outbreak of the war. The metal is widely used in vehicles from body panels, engines and doors."}],[{"start":163.14999999999998,"text":"Gerrit Reepmeyer, partner at consultancy AlixPartners, estimated that the rise in aluminium prices could add between $500 and $1,500 to the cost of a vehicle, if it persists and no hedges were applied. "}],[{"start":177.04999999999998,"text":"Ford’s chief financial officer Sherry House told investors this week that even before the Iran conflict, “we were already seeing global industry shortages. Then you had the Middle East”."}],[{"start":188.49999999999997,"text":"The company suffered significant disruption to production of its top-selling F-Series pick-up trucks before the war, after a pair of fires at an aluminium plant operated by its supplier Novelis. "}],[{"start":200.59999999999997,"text":"Ford has been forced to source aluminium from overseas while Novelis recovers, adding $1bn of costs — including the hit from 50 per cent Section 232 tariffs on the metal."}],[{"start":212.24999999999997,"text":"Those tariffs are distinct from the “liberation day” levies struck down by the US Supreme Court in February, on which carmakers can now seek refunds from the Trump administration. The president on Friday threatened separate tariffs on European-made cars imported into the US."}],[{"start":228.59999999999997,"text":"The rise in oil and gas prices and shortages of naphtha, a material derived from crude oil and used to produce plastics, will also put pressure on various car components from interiors and coatings to rubber tyres. "}],[{"start":242.64999999999998,"text":"“We do expect raw material [costs] to step up further in the remainder of the year, higher than what we anticipated at the beginning of the year,” Mercedes-Benz finance chief Harald Wilhelm told investors this week."}],[{"start":255.49999999999997,"text":"If the war were to continue for a “longer period, we cannot rule out the possibility of bottlenecks in individual commodities,” he added. "}],[{"start":263.54999999999995,"text":"Automakers have also cited higher costs for DRam chips, as memory chip companies shift production away from the less advanced semiconductors used in cars towards chips for AI data centres."}],[{"start":275.44999999999993,"text":"The carmakers will have to decide when to pass these costs on to consumers. The first to raise prices risks sacrificing sales, Waas said. "}],[{"start":283.94999999999993,"text":"Consumers are already stretched given elevated vehicle costs following the pandemic, limiting the scope for price rises."}],[{"start":291.3999999999999,"text":"“But obviously at some point you will be just forced to increase prices. And as long as everybody is doing it, you basically keep your market share,” he said."}],[{"start":307.8999999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777785540_2406.mp3"}