Ford Motor Co. is letting thousands of new vehicles sit idle at their assembly plants because a global shortage of semiconductors is impeding production.
The chip deficit, which started in December, means Ford could miss out on $1 billion to $2.5 billion in sales, the Michigan automaker warned this week. Ford said its Edge sport utility vehicle and F-150 pickup trucks will sit at its Louisville, Kentucky, plant for weeks awaiting more chips. Until these vehicles can be fully assembled, Ford is cutting employee shifts at the Kentucky plant.
Ford said in a statement Thursday it will hold newly built Edges and F-150s before shipping the “vehicles to dealers once the modules are available and comprehensive quality checks are complete.”
The coronavirus pandemic is the main factor behind the chip shortage, according to the Semiconductor Industry Association. Sales of electronic devices have soared because many people were working from home, logging into telemedicine visits and attending remote learning from their laptops. The nation’s limited supply of semiconductors went largely to those devices at the expense of automobiles, the trade group has said.
Compounding the problem, last month’s massive winter storm in the Midwest and southern and central states forced Samsung and NXP Semiconductors to temporarily stop producing chips at their facilities in Texas.
A semiconductor is a computer chip that serves as the brain of an electronic device. It handles the complex thinking such as arithmetic and data storage that is integral to cell phones, tablets, kitchen gadgets, laptops, video game consoles and automobiles. In vehicles, dozens of individual semiconductors are used to control everything from engine temperature to alerting drivers of the need for an oil change.
The White House has weighed in on the chip shortage and its impact on the auto industry. President Joe Biden last month said he’s looking to send $37 billion in federal aid to semiconductor companies so they can ramp up production. Asian nations, including China and Taiwan, produce most of the chips used in American cars and devices.
Ford is just one of numerous automakers impacted by the semiconductor shortage. A Toyota spokesman told Bloomberg News that production in Texas on the Toyota Tundra pickup truck will fall by 40% due to the shortage. General Motors has halted production at assembly plants in Kansas, Canada and Mexico while it continues partially building other vehicles in Missouri and letting them sit.
The chip shortage means there will be 1 million fewer automobiles produced globally this year, Stephen Foreman, an economist with Oxford Economics, predicted in a research note. Automakers should only feel the financial hit of fewer chips during the first quarter of 2021.
“So the impact is likely to be temporary, allowing automakers to boost production from the second half of 2021 to make up for lost ground,” Foreman said.