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Ford is latest automaker to cut production due to microchip shortage

Scott Tong Jan 11, 2021
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The Ford factory in Louisville, Kentucky, in 2017. The plant recently had to shut down due to a shortage of semiconductors. Bill Pugliano/Getty Images
COVID-19

Ford is latest automaker to cut production due to microchip shortage

Scott Tong Jan 11, 2021
Heard on:
The Ford factory in Louisville, Kentucky, in 2017. The plant recently had to shut down due to a shortage of semiconductors. Bill Pugliano/Getty Images
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In Louisville, Kentucky, Monday, a Ford factory that assembles the Escape SUV began a weeklong shutdown because it doesn’t have enough semiconductor supplies. It has become the latest automaker to feel the impact of a global chip shortage.

Jeep, Honda, Toyota and Volkswagen are among the brands that have also reduced production, citing a scarcity of semiconductors, which are also at the heart of the supply chain for consumer electronics.

“Everyone building videogames to phones to laptops needs those same chips,” said Joseph McCabe, president and chief executive of AutoForecast Solutions. “And when you’re a chip manufacturer, you’re gonna go and satisfy your larger customers first. Consumer electronics are exponentially larger on a global basis than vehicle builds.”

In vehicles, microchips go into everything from engine control modules to infotainment systems to electronic stability controls.

When the pandemic first hit last spring, auto plants shut down and carmakers curbed semiconductor orders.

The thing is, the makers of chips that go inside consumer electronics and vehicles can only crank out so many.

“A lot of the stuff that uses the most advanced manufacturing is made at companies like TSMC out in Taiwan, and the factories are just full,” Stacy Rasgon, managing director and senior analyst at Bernstein Research, said.

He said eventually, semiconductor supplies will catch up to the automakers’ production cycle.

Until then, carmakers will likely pause production of their low-profit models and save valuable microchips for others on the assembly line, said Alan Baum, principal at the automotive research firm Baum and Associates

“The Ford Escape is not doing particularly well right now,” Baum said. “And so Ford made the judgment to take that facility down for a week, because they could afford to do that.”

Baum warned that if the chip shortage begins to hurt production of financial moneymakers like Ford’s F-150 pickup, then carmakers will be in a real jam.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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