Automakers idle more plants over continued chip shortage

by SpeedLux
semiconductor chip

A worsening shortage in semiconductor chips is forcing automakers to curb more vehicle production, potentially short-circuiting the industry’s attempt to recover from the pandemic. The chip scarcity is even starting to impact other industries, with Samsung Electronics this week warning it is “closely watching the implications,” warning it could hit production of its smartphones.

Ford said Thursday it would temporarily halt two of three shifts at its Chicago Assembly Plant next week, a move that will impact enough share of the factory’s 5,300 hourly workers. Ford also extended a plant closure in Louisville, Kentucky, for at least another week.

Today’s automobiles are essentially computers on wheels, using hundreds of microprocessors and other chips to regulate their powertrains, control infotainment systems, and operate the recent digital safety systems.

As auto production and demand for chips declined sharply during the coronavirus crisis, the need for microchips for the consumer electronics industry surged as millions of people were forced to work and shop from home, purchasing new smartphones, computers, web cameras, and other digital devices.

Now, the auto industry is racing to recover, speeding up production to refill depleted vehicle inventories. But a report released this month by Bloomberg estimated that Detroit automakers alone could lose as much as $61 billion in revenues this year if the shortage of chips continues.

The impact of the crisis varies by automakers. General Motors said it has so far faced no closures or slowdowns — but Toyota, Volkswagen, Honda, Mercedes-Benz, Audi, Subaru, and Nissan have reduced their production in the U.S. or other parts of the world. Stellantis, the new industry giant formed by the merger of Fiat Chrysler Automobiles and France’s PSA Group, has closed two North American plants.

Ford Motor has been one of the hardest-hit as the automaker will idle two of three shifts at the Chicago plant producing the popular — and highly profitable — Explorer SUV. Spokesperson Kelli Felker said the exact number of employees being affected has not been determined, but the factory hires 5,300 hourly workers and hundreds more on salary.

The closure is set to last for a week but, in a letter sent to employees and obtained by the Detroit Free Press, local union leader Coby Millender said that he has been advised there is “a strong potential for additional weeks” of closure if Ford can’t come up with more chips sooner.

Ford has already extended the entire shutdown of the Louisville plant producing another popular SUV, the Escape.

“It is a really fluid situation and I couldn’t predict what’s ahead for us,” Felker said, quoting a separate company statement that said Ford is “working closely with suppliers” to deal with the shortages.

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