Ford to Idle or Curb Output at More Plants Because of Chip Shortage

Date: Thursday, July 1st, 2021
Source: The Wall Street Journal

Ford F +0.20% Motor Co. said the computer-chip shortage will force it to cut output across more than a half-dozen U.S. factories in July, a sign that the supply-chain troubles could take longer to ease than auto-industry executives previously believed.

Ford said Wednesday that its pickup truck factories in Michigan, Kentucky and Missouri will reduce or stop production for much of July, while an Explorer plant in Chicago will be idled for the entire month. Production of several other popular models also will be reduced or scrapped, including the Escape SUV and Mustang sports car.

The Chicago plant and the factories that assemble the pickup trucks—Ford’s biggest moneymaker—had cut production earlier this spring because of the chip shortage but had been back to full tilt in recent weeks, a spokeswoman said.

Executives from Ford and other auto makers have said that the chip shortage should begin to ease in the third quarter but have cautioned that the situation is fluid.

Ford said it is giving priority to the completion of thousands of vehicles that it has assembled in recent months but parked in lots near factories as it awaits needed computer chips. It will continue to build new vehicles, but will curb production so it can move out some of those waylaid models, the company said.

Ford shares fell less than 1% in afternoon trading Wednesday.

The chip shortage has crimped auto production across most or all car manufacturers globally since the start of the year. But the effect has been uneven, with Ford among the auto makers dealt an exceptionally hard blow.

Ford has been forced to scrap production of more than 350,000 vehicles that it had planned to build this year through May, compared with about 250,000 vehicles for General Motors Co., according to research firm LMC Automotive.

Ford also has fared worse on the impact to full-size pickup trucks and large SUVs, which are the main profit engines for Detroit companies and Stellantis NV, maker of the Ram brand. About 37% of Ford’s lost production came from those categories, compared with 13% for Stellantis and 1% for GM, the research firm said.

Across industries, the fallout from the Covid-19 pandemic continues to disrupt supply chains globally, with shortages ranging from lumber and clothing to tires and plastic. The semiconductor constraints also have scrambled the consumer-electronics sector and led to higher prices on laptops and other devices.

Ford expects to have eight North American assembly plants either down or with limited output during July because of the semiconductor shortage. GM expects the supply constraints to idle or reduce production at three assembly plants in the region during the month, a spokesman said.

GM Chief Financial Officer Paul Jacobson said in mid-June that GM expects the chip shortage to begin to ease in the second half of the year. But the company’s dealerships likely will have low inventories well into 2022, he said.

Meanwhile, Toyota Motor Corp. has seen minimal impact to its North American factories from the chip shortage relative to U.S.-based rivals, LMC Automotive said.

Bob Carter, Toyota’s sales chief for North America, said the situation still is tenuous and could continue to cause production snags, but the auto maker is operating at or near full factory capacity in the region.

“I’m confident the worst is behind us for Toyota,” he said Wednesday.

Ford executives have cited a March fire at a semiconductor factory in Japan owned by Renesas Electronics Corp. RNECY -2.05% as one reason for the outsize effect on its production. Nine of Ford’s direct suppliers of various components source chips from the company, Ford Chief Executive Jim Farley has said.

Thousands of U.S. workers at GM, Ford and Stellantis factories have been intermittently out of work in recent months as plants go offline or reduce shifts. In addition to unemployment benefits, unionized workers are eligible for supplemental pay from the companies under their labor contracts with the United Auto Workers.


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