Chip shortage has Detroit automakers struggling to maintain truck production and meet orders

by Buzz Street Times

An employee works on a Ford Motor Co. Super Duty Truck engine at the Ford Kentucky Truck Plant in Louisville, Kentucky, Sept. 30, 2016.

Luke Sharrett | Bloomberg | Getty Images

Detroit automakers are struggling to keep production and shipments of highly profitable pickup trucks going as interruptions in manufacturing across the world have led to a global semiconductor chip shortage that’s hitting the automotive industry.

Ford Motor on Monday said it is cutting a shift at its Kentucky Truck Plant in Louisville that produces its larger F-Series pickups and full-size SUVs. It’s also temporarily shuttering a plant in Ohio that builds vans and other trucks. Both plants are expected to return to normal production in a week, according to the company.

The cuts come after Ford joined General Motors on Thursday in confirming it is partially assembling some trucks to be stored until parts become available. Stellantis, formerly Fiat Chrysler, also recently confirmed it was partially assembling some of its older Ram pickups due to a lack of semiconductor chips.

“We are working closely with suppliers to address potential production constraints tied to the global semiconductor shortage and working to prioritize key vehicle lines for production, making the most of our semiconductor allocation,” Ford spokeswoman Kelli Felker said in an emailed statement.

For months, automakers have been prioritizing assembly of high-margin vehicles such as pickups by cutting production of cars and crossovers. The most recent actions show the difficulties facing the companies as they attempt to maintain production of those vehicles.

Thus far, GM and Stellantis have been successful in keeping truck production up and running more than Ford, which previously cut shifts of its F-150 pickup.

Semiconductor chips are extremely important components of new vehicles for infotainment systems, power steering and brakes, among other systems. The parts can contain several sizes and different types of chips.

Consulting firm AlixPartners forecasts the shortage will cut $60.6 billion in revenue from the global automotive industry this year. GM expects the problem will reduce its free cash flow by $1.5 billion to $2 billion this year. Ford said the situation could lower its earnings by $1 billion to $2.5 billion in 2021.

Automotive executives have characterized the situation as fluid. Stellantis CEO Carlos Tavares earlier this month said the shortage might not be fully resolved until next year. GM CFO Paul Jacobson last month called the shortage a “short-term” problem, saying the company hopes to make up much of its lost production due to the chip shortage in the second half of the year. Volkswagen of America CEO Scott Keogh told CNBC’s “Squawk Box” on Monday the shortage is expected to last into the fall, but “it is something we are navigating week by week.”

GM has temporarily shuttered or cut production at several plants that produce cars or crossovers to prioritize production of its full-size pickups and SUVs. Plants in Kansas and Ingersoll, Ontario are expected to remain closed until at least mid-April. They shuttered in early February.

“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs for our customers,” GM spokesman David Barnas said in an emailed statement. “We have not taken downtime or reduced shifts at any of our full-size truck plants due to the shortage.”

Another GM plant in Mexico is expected to reopen in two weeks after being shuttered Feb. 8, while a plant in Michigan is expected to reopen by April after halting production a week ago. GM plants in Brazil and South Korea also have been impacted by the shortage.

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