Industry-wide issue “may not be fully resolved until 2022”
By Wolf Richter for WOLF STREET.
If an car assembly plant runs out of only one component that couldn’t exist delivered because the component maker had run out of one type of semiconductor – of the thousands of semiconductors that go into a modern vehicle – the vehicle cannot be built, or cannot be finished and sold, and product halts. That’s essentially the problem that the entire auto industry is now facing.
Ford, when it announced earnings this evening, shed more light on what the global semiconductor shortage, “made worse” past the fire in March at a institute of a semiconductor supplier in Japan, ways in terms of lost vehicle production and lost dollars.
It included these whoppers:
- It expects to lose 50% of its planned production in Q2, after having lost 17% of its planned production in Q1.
- The semiconductor shortage “will get worse before it gets meliorate.”
- In the 2d half, it expects to lose ten% of planned production.
- For the whole year, information technology expects to lose 1.1 million vehicles of production, compared to prior estimates of production losses of 200,000 to 400,000 vehicles.
- Due to the semiconductor shortage, it expects an “adverse effect” to earnings before involvement and taxes (EBIT) of $ii.v billion.
- “Like many others in the industry,” information technology expects that the global semiconductor shortage for the entire manufacture “may not be fully resolved until 2022.”
Ford expects the flow of semiconductors from its suppler in Japan to resume by the stop of Q2, and that the issue would “bottom out” in Q2, “with improvement through the remainder of the year.”
CFO John Lawler said during the earnings call that Ford had 44 days of supply of vehicles on dealer lots at the end of Q1. In the manufacture, about 60 days’ supply would be well-nigh right. But the production cuts are going to brand the inventory situation a lot worse.
Ford has already announced numerous plant shutdowns and shift eliminations so far this twelvemonth. Its Dearborn assembly plant that builds the bestselling vehicle of all times that Ford totally depends on, the F-150 pickup truck, was shut downwardly for two weeks in Apr. The Kansas City plant that as well builds the F-150 and the bestselling cargo van, the Transit, is still in a ane-month shutdown. Its establish in Chicago that assembles the Explorer has been shut downwardly nearly all Apr and won’t restart production until old in May.
This semiconductor shortage that is now crushing output in the auto industry is some other element that will muck upwards the inflation picture.
Used vehicle prices have already spiked in a celebrated manner. And when new vehicles are in short supply and any deals are just faint memories, with some dealers selling some vehicles over sticker even, as we now hear, demand will shift to used vehicles.
Simply used vehicles are too starting to exist in short supply because the rental car companies slashed their orders last yr and now don’t take enough vehicles to remove from service and put on the wholesale market to feed the used vehicle retail supply. And as the semiconductor shortage drags on, and new vehicle production gets slashed further, the used vehicles marketplace is entering deeper turmoil.
The semiconductor shortage that was and so fabricated worse past the semiconductor plant fire in Japan and past the semiconductor institute shutdowns in Austin due the snowmageddon is hitting an manufacture that had already been tangled upwardly in massive distortions, supply chain issues, and production issues due to the Pandemic.
No one was ready for the tsunami of stimulus coin that done in waves over American consumers that caused a historic spending spree on durable goods. Many of those durable goods contain chips. And now in that location is a global bit shortage.
This surge government-goosed consumer spending produced all kinds of distortions and problematic records. Read… Imports and Trade Arrears in Appurtenances Explode to Worst E’er, Powered past Stimmies and Decades of Rampant Offshoring
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