The Ford plant in Louisville, Kentucky – with its 3,900 employees – is worthless this week, as the automaker was forced to temporarily stop production due to a shortage of critical microprocessors and other computer chips.
Ford is not alone. Fiat Chrysler is deactivating production at a Brampton, Ontario, plant; While Subaru will trim “several thousand” vehicles from its production schedule at plants in the US and Japan due to chip shortages. General Motors, Honda, Reno, Toyota and Volkswagen are also feeling the impact – with others expected to follow.
Ironically, the industry was brought to an end by the industry’s unexpected rebound from the Kovid-19 epidemic, which led to the long factory shutdown last spring, said Kristin Dzikek, a senior industry analyst at the Center for Automotive Research. Manufacturers have increased production to respond to inventory shortages, putting them in competition for chips with the consumer electronics industry.
“Today’s automobiles use a large number of computer chips, chips in engines, chips in the seat, chips in everything, but they are in tight supply right now,” Dziczek said.
The FCA has scheduled downtime at its Canadian plant, which manufactures the Chrysler 300, Dodge Charger and Dodge Challenger, while also delaying resuming production that had already been idled at the Mexican Jeep factory.
“We are working closely with our global supply chain network to manage any manufacturing impact caused by the global microchip shortage,” FCA told NBC News in an email statement.
Subaru, meanwhile, is trimming production at an Indiana plant, while halting production for two days at a factory in Japan, while assessing its supply situation. Rival Nissan has cut production in Japan. In return, Volkswagen has slowed operations at factories in North America, Europe and China. Toyota has had to make similar cuts.
Honda indicated it may be forced to cut operations back in February. And Daimler AG president Ola Callenius said it was “too early to tell” if and when the German company’s Mercedes-Benz and smart brands could be forced to curb production.
Manufacturers have refused to openly discuss the lack of detail, citing competing concerns, but the biggest problems include microprocessors and other digital devices used to control engines and transmissions. Supply barriers are also increasing to include Wi-Fi and Bluetooth and video display systems in today’s vehicles, as well as the microchips needed for the latest smart security systems such as blind-spot detection.
The epidemic led to prolonged closures by auto plants in North America, as well as closures in Europe, Latin America, and Asia. When sales bounced back more quickly than expected, manufacturers began to push the maximum to reduce production.
But the consumer electronics industry itself was dealing with record demand for smartphones, computers, game consoles, web cameras, and other devices as most of the nation went into lockdown and millions of Americans were forced to work from home. In recent months, the industry has faced a shortage.
Still, in a battle for rare chips, Dziczek said, consumer electronics manufacturers often win “because they are willing to pay more for the chips they need”.
Chip suppliers have been pushed to ramp up production, but how fast they can react due to the expansion of existing facilities and the cost and complexity of adding new plants. Complicating the problem, automotive chips are often supplied by older “foundries” using dated 8-inch wafer technology that is difficult to update.
Asahi Kasei Corp. Last October’s fire at a major Japan-owned chip plant owned by Japan has led to headaches, especially for Japanese automakers.
President Donald Trump’s ongoing trade war with China also hasn’t helped. The ban was announced last year on Semiconductor Manufacturing International Corp, which was sending business to the US for alternative supplies.
Then, the auto industry must deal with the complex layer of interlocking suppliers. Many of the major, digital components used in today’s vehicles come from exterior parts, such as Canada’s mega-supplier Magna International and German giants Robert Bosch.
The German supplier said in a statement, “Despite the difficult market conditions, Bosch is doing all it can to supply to its customers and to keep any other influence to a minimum.”
But, in turn, those Tier I suppliers often buy bits and pieces from lower-tier vendors. A glitch at any level of the chain can leave automakers empty handed.
Analysts and industry officials believe the situation is likely to worsen in the coming week. And will compound the challenge that the auto industry has in recovering from its 2020 failures.
“We expect supply chain disruptions” Post Epidemic, a leading analyst with Calls Automotive, said Michelle Krebs, but it has hit harder and faster than anticipated. “Chip shortages are only going to make things worse,” he said, especially for manufacturers coping with “products in supply long ago”.