The year-end earnings reports filed by major parts suppliers over the past several weeks show that for many companies, revenue has returned to — and in some cases even surpassed — levels seen in 2019, before the COVID-19 pandemic threw the global supply chain into a tailspin.
That's good news for a supply sector that has been ravaged by production shutdowns, high materials costs, a tight labor market, geopolitical uncertainty and other problems for more than three years.
But it doesn't tell the whole story.
While revenue figures are returning to pre-pandemic levels, profits at many suppliers remain well below where they were in 2019. Earnings continue to be weighed down by higher labor, logistics and energy costs, in addition to persistent factory interruptions due to the global microchip shortage and the massive costs of investing in electrification, software and advanced driver-assist systems.
"Even if a supplier has the same revenue or is getting close to 2019 levels of revenue, their cost structure has changed significantly," said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility. "And that's the biggest issue in all of this."