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Feel The Burn: Auto industry feels effects of global microchip shortage

Toronto, Ontario — Automakers in North America are starting to feel the effects of a global shortage of semiconductors, which has caused a crunch for manufacturers worldwide, adding a wrinkle to the industry’s attempted comeback from the COVID-19 crisis. 

Ford Motor Co. confirmed Friday that it will idle its Louisville Assembly Plant in Kentucky this week “due to a supplier part shortage connected to the semiconductor shortage,” company spokeswoman Kelli Felker. 

“We are working closely with suppliers to address potential production constraints tied to the global semiconductor shortage,” Felker said in a statement.

Ford builds Escape and Lincoln Corsair SUVs in Louisville. The automaker said it has moved up a previously planned week of downtime to nest week due to the parts shortage. The production stoppage will affect 3,900 workers who will make approximately 75 per cent of their gross pay during that time. 

Meanwhile, Fiat Chrysler Automobiles (FCA) NV said Friday that it would delay the restart of its Toluca, Mexico, plant, which builds the Jeep Compass, and would schedule downtime at its plant in Brampton, On., which builds the Chrysler 300, Dodge Charger, and Dodge Challenger.

“This will minimize the impact of the current semiconductor shortage while ensuring we maintain production at our other North American plants,” company spokeswoman Kaileen Connelly said in a statement.

A spokesperson for Toyota Motor Corp.’s North America division said that the automaker has scaled back production of its Texas-build Tundra pickup truck by 40 per cent this month in response to the shortage. Toyota is still evaluating how the shortage might affect other products as the manufacturer attempts to put in place “counter-measures” to minimize the impact. 

General Motors Co. (GM) has not announced any impacts on its production schedules, but spokesman David Barnas said in a statement that the Detroit automaker is “aware of the increased demand for semiconductor microchips as the auto industry continues its global recovery.” 

“Our supply chain organization is working closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impacts on GM production,” said Barnas. 

The shortage is sending waves of disruption across the automotive industry, according to automakers and media reports from around the world several factors explain the parts issue, but a major factor is a pandemic. 

When large groups of manufacturing operations grounded to a halt in early 2020, suppliers found themselves with plenty of capacity to fill new orders; but as consumer demands bounced back quicker than expected, much of that capacity went to consumer goods such as gaming devising and cell phones. 

When the automotive manufacturers resumed production and encountered more robust demand than they had expected, they were essentially at the back of the line. 

“If you consider this to be one of those onion analogies, as you pull it apart, it’s all going to go down to the pandemic,” said Phil Amsrud, senior principal analyst for IHS Markit’s automotive semiconductor research area.”

Semiconductors are crucial components used in everything from instrument clusters to the infotainment systems that are everywhere in modern-day vehicles. And, automakers are increasingly competing with other sectors for the components as they need more of them for technologically-advanced, electric-powered vehicles. 

“It’s not uncommon in any year for there to be tightness in the supply chain, but a lot of what we’re seeing now is a result of, everybody hit the brakes early last year and then has been trying to read the tea leaves to figure out when do I start ramping production back up?” said Amsrud. “By the time the automotive (manufacturers came) back, all that capacity is consumed elsewhere.”

The supply-chain constraint comes as the global auto industry undertakes a recovery from the early days of the pandemic, which shuttered production in North America for eight weeks in the spring of 2020. Auto plants have largely avoided any major disruptions related to the virus spreading among workers, but other pandemic-related supply issues have at times slowed down production.

IHS Markit’s analysts don’t see this as a long-term problem for the industry, but one that could cause production snarls through the first half of the year.

“It’s a mix problem; too much of it is going to consumer applications, compared to automotive. That will self-correct over time,” Amsrud said. “We’ll get through this, even though it’s going to be an uncomfortable period until we get there.”

 

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