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Explore how major players like ArcelorMittal, Chrysler, and Ford address industry overcapacity challenges. Learn about global steel production adjustments, European plant closures, and the effects of excess automotive manufacturing capacity on financial performance.
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ArcelorMittal, 3rd Nov. 2011 • ArcelorMittal is the world's largest steelmaker • CFO Aditya Mittal: • We will operate global steel production capacity at slightly lower than 71% in the fourth quarter • At this point in time in our forecast we are seeing a marginal decline in shipments compared with the third quarter
Chrysler, 15th Jan. 2013 Automakers have so far announced a handful of European plant closings to address the overcapacity issue. But Mr. Marchionne has consistently argued for a broader reduction in the number of factories in Europe. “The gap is too large,” he said. “You can’t close a 5 billion euro gap in operating profit by tweaking the machine.”
Ford Annual Report 2015 Risk Factors Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors. The global automotive industry is intensely competitive, with manufacturing capacity far exceeding current demand. According to the December 2015 report issued by IHS Automotive, the global automotive industry is estimated to have had excess capacity of about 31 million units in 2015. Industry overcapacity has resulted in many manufacturers offering marketing incentives on vehicles in an attempt to maintain and grow market share; these incentives historically have included a combination of subsidized financing or leasing programs, price rebates, and other incentives. As a result, we are not necessarily able to set our prices to offset higher costs of marketing incentives, commodity or other cost increases, or the impact of adverse currency fluctuations, including pricing advantages foreign competitors may have because of their weaker home market currencies. Continuation of or increased excess capacity could have a substantial adverse effect on our financial condition and results of operations.
SFAS 151 • This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges. . . ." • This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.