Supply Shortages Are Forcing Automakers To Halt U.S. Production

As if the automotive industry wasn't under a lot of stress when a global pandemic crushed its global supply chains, it is now facing supply shortages. The biggest automakers warned that the global shortage of semiconductors would force production cuts. General Motors Company GM and Ford Motor Company F warned the chip shortage would materially erode margins and could lower expected automotive earnings before interest and taxes by as much as $2 billion for GM and $2.5 billion for Ford. Ford announced it was briefly reducing the output of its star vehicle, the F-150 pickup, as a result of the chip shortage.

Nissan Motor Co NSANY also signaled problems. Even Volkswagen VLKAF said this week that the computer chips crunch had hampered operations, particularly in the United States. Although the impact doesn't span over the entire [vehicle] lineup, some models might be constrained.

But jammed ports in California are particularly problematic for Asian carmakers whose U.S. factories depend on imported parts. As a result, Toyota Motor Corp TM will intermittently cut shifts or production lines and Honda Motor Co HMC revealed on Wednesday it will stop production at most of its U.S. and Canadian plants for a week due to shortages of essential components as well as consequences from extreme weather.

Toyota

Japan's biggest automaker has managed to weather the storm in relatively better shape because of its supply-chain monitoring system and a long track record of accuracy when it comes to orders. But even Toyota cited an unspecified shortage of petrochemicals at its North American plants, affecting production at vehicle factories in Kentucky and Mexico, and an engine plant in Alabama. It will react by intermittently cut shifts or production lines of the Camry and Avalon sedans, the Tacoma pickup truck, and the hybrid version of its RAV4 sport-utility vehicle. For now, it doesn't expect to have to furlough any workers.

Honda

Honda will halt production at most of its U.S. and Canadian car factories next week because of supply-chain issues including the above-mentioned port backlogs that have delayed the delivery of parts.

But Honda has been hit by a combination of factors besides port issues, such as the shortage of semiconductors, pandemic-related problems, and consequences from severe winter conditions across the central U.S. that caused pipes to burst in some of its factories. Most of Honda's five auto plants in the U.S. and Canada will be temporarily shut down on March 22. The duration depends on the supply of parts but workers will be performing other tasks at the plants during this time. The last time Honda suspended production was this time last year when lockdowns came into the picture. As a result of shutdowns, it had to furlough around 14,000 workers in April so hopefully, this won't be the case this time around.

GM Is Leaving A Fuel Management Module Out Of Certain 2021 Pickups

In an effort to deal with the ongoing microchip shortage, GM will make some 2021 full-size pickups without a certain fuel management module which means these trucks will burn more fuel to go the same distance, resulting in more carbon emissions. GM will have to pay for those trucks getting around one fewer mile per gallon of gas.

Billion-dollar Issues Won't Go Away Overnight

A global microchip shortage is causing many problems to automakers across the globe. Along with supply chain issues, these problems aren't small. They are billion-dollar issues that easily turn into yet another nightmare for automakers as they cannot be resolved overnight.

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