Even Tire Companies Can't Avoid the Microchip Menace

Tires 6 photos
Photo: Continental Rubber Co
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The German multinational tire company Continental announced it would be lowering the forecast for their profit margins for 2021 at the hands of the global microchip shortage. For a product so devoid of anything digital, this didn’t exempt the tire industry from the crisis threatening to bring the whole industry to its knees.
Initial reports claim Continental expects to lower its profit margins by between 5.2%and 5.6%, way down from a previous estimate of 6.5% to 7%. Outside of chip shortages, the company also claims a worldwide supply chain meltdown is a second major contributing factor in a profit loss the global leader in performance tire production likely hadn’t anticipated.

Statistics presented by Continental themselves show their third-quarter sales were approximately 8.04 billion euros ($9.35 billion). Down from 8.6 billion in the third quarter last year. A drop in sales of only 500 million euros may not seem like a dire situation for a brand as large as Continental.

But with shortages in other materials like magnesium and natural rubber also reported in the last year, there may be tough times ahead not just for Continental but the entirty of the tire industry. How it affects the industry as a whole still remains to be seen.

Executives from other Tire manufacturers, like Goodyear in America, have already claimed they will not be affected by potential rubber shortages, at least in the short term. But the global manufacturing sector is in the midst of a supply chain catastrophe not seen since the Second World War almost eight decades ago. It’s a precarious situation that could turn even more ugly for the industry exceptionally quickly with enough disruption.

At day’s end, if there are no new cars in need of four shiny new tires, Continental, Goodyear, and every other tire company on the planet will be hard-pressed to move nearly as much inventory as they’re likely used to.
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