Ford Motor Company (NYSE:F) has halted production at one of its German plants which is a sign that the global computer chips shortage is putting pressure on vehicle manufacturers and threatening recovery from the COVID-19 pandemic.
Ford halts production at Saarlousi factory
The company indicated that it will idle the Saarlouis factory in Germany until February 19, 2021, due to weak demand and shortage of chips. The US car manufacture produces its most popular car model in Europe at the factory, which employees over 5,000 workers. A Ford spokesperson indicated that they are observing the situation closely and have to adjust production schedules to minimize the effect on employees, customers, suppliers, and dealers in Europe. For now, Ford is not anticipating halting of production in its other European plants.
Last week Ford closed its SUV factory in Louisville, Kentucky, due to semiconductor shortage. Following the halting of production in Germany it now seems that the problem affecting most car makers globally could be getting worse before it improves.
The pandemic affected car sales last year and this led to manufactures reassigning capacity from carmakers to gaming systems, smartphones, and other devices where demand remained high. Currently, suppliers are tight and automakers are struggling to get the semiconductors they need.
Automakers experiencing chip shortage
Automakers affected by the chip shortage include Fiat Chrysler, Toyota Motors Company, Volkswagen, Honda, and Nissan. The companies use the chips in making several applications including navigation control and driver assistance systems. On average a car will have 50 to 150 chips. Last month Volkswagen said that it will modify production at factories in Europe, North America, and China this quarter. These changes affect VW Golf production and other models from the Seat, Skoda, and Audi brands.
HIS Markit’s automotive team executive director, mark Fulthorpe said that there is increase disruption for light vehicle manufacturers for the supply of systems that use semiconductors. The disruption comes when car manufacturers who experienced sales decline last year are trying to get back as pressure to invest in EVs also grows.