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Originally Posted by Desertnate
So very true. I wonder what the current environment does to the traditional approach to model year production dates.
With the backlog of MY22 models still undelivered, do they continue to build those out until all orders are fulfilled which blows their internally established cut over dates, or do they stick to the production dates and roll all the unfulfilled MY22 orders over to MY23?
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They won't care about the "undelivered" vehicles and will just roll orders into the next model years.
The industry is a little different than others and sometimes can be hard to understand the way it works.
The Tier 1 suppliers (that send the final product directly to the OEMs) generally work on a three or four year contract system. The are contracted to make X amount of parts for each model year. This is actually why you usually see a refresh or other bigger changes after 3 or 4 years. This plan is set up as much as two years before production is scheduled.
If the OEM wants more parts within that contracted period they can up the order but it costs them a small fortune as the unit price was set for that original X number. If they cut back orders then normally they still pay for parts that they cancelled as again the price was set for X amount. This means under normal conditions they are going to stick as close to that X number as possible and neither make more nor less than plan.
The parts manufactures for automotive work almost exclusively on the Just In Time system. There are no big warehouses full of ready to go parts but instead they are all made and shipped to literally arrive at the plants "just in time". This system can work well for flexibility but also cause total chaos both at the same time depending on where the parts are in the pipeline when the order is increased or decreased.
Now... I said that under normal conditions the OEMs have to pay for cancelled parts whether they are used or not but there is one standard clause in the contracts that rarely comes into play. That clause is that the OEMs can cancel parts orders without penalty or payment in the event of an uncontrol able disaster or interruption. So if a vehicle just isn't selling they are going to pay for all the parts whether they stop making it or not (looking at you Aztec) but if there is some reason beyond their control they can reduce orders without cost. Of course this clause has come into effect many, many, many times over the last two years. Since they are not paying to not make cars they will adjust the numbers for each model year to meet what they can build not to what they have orders for or even what the original plan said they would build.
The thing that is apparently coming out of this current situation is that most of the car companies are looking at a customer preorder build system even when all this shit clears up so ordering a car and waiting months to get it is the likely wave of the future.