General Motors and Ford said Thursday they will temporarily idle more North American factories over a shortage of semiconductors, as the months-long supply pinch continues to hammer a range of automakers.
Ford said it will idle production lines next week in Chicago; Kansas City, Mo.; and Flat Rock, Michigan, and will cut production in Avon Lake, Ohio.
The shutdowns will affect about 10,000 workers, GM spokesman David Barnas said. Ford did not say how many workers will be affected.
Hourly GM workers represented by a union “will receive about 75 percent of their compensation through a combination of unemployment and supplemental benefits,” Barnas said by email.
“We continue to work closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impact on GM,” Barnas said. “Our intent is to make up as much production lost at these plants as possible.”
“All permanent employees with more than one year of service receive approximately 75 percent of their gross pay during down weeks,” Ford spokeswoman Kelli Felker said by email.
The pandemic-related chip shortage has hit nearly every major automaker, leading to production cutbacks worldwide that have also affected Toyota, Volkswagen, Honda and others. Chinese electric-vehicle maker Nio also temporarily halted production in March.
The global auto industry will produce 1.5 million to 5 million fewer vehicles this year than originally planned because of the supply constraints, according to the consulting firm AlixPartners.
The production cutbacks “have the potential to reverberate” through the economy because when automakers idle plants, “they not only have to deal with their own workers but they have lots of input suppliers that rely on their business,” said Chad Bown, an economist with the Peterson Institute for International Economics in Washington.
Semiconductors, also known as computer chips, are the brains behind a wide array of electronic devices, including cars, which use dozens of semiconductors to control air bags, windows and other parts. Chips of all sorts have been in short supply for months as a surge in demand far outstripped supply across the globe, leaving manufacturers of all kinds in the lurch.
The White House has been leaning on big chip producers and their host nations, including Taiwan, to increase output. It is also calling for $50 billion in federal funding to incentivize more domestic chip production, though those funds, if approved by Congress, would be too far off to alleviate the current shortages.
The roots of the shortage lie in the early weeks of the pandemic, when auto plants worldwide abruptly shut down amid stay-at-home orders. Auto sales fell by almost half between February and April last year. As a result, car companies and their parts suppliers drastically cut their semiconductor purchases.
At the same time, demand for computers and other electronics soared as many consumers began working from home. That caused electronics manufacturers to step up their chip purchases. When auto demand bounced back, car companies found semiconductor factories too busy with other orders to fill their needs.
Chip factories cost billions of dollars to build or expand, so there is no simple way to quickly boost production.
The complexity of auto supply chains is compounding the problem. GM alone buys auto parts from roughly 250 suppliers that in turn buy chips from 11 different semiconductor makers, said Ambrose Conroy, founder of Seraph Consulting, which is advising several automakers on the chip shortage.
“We’re going to be talking about the semiconductor issue for the remainder of 2021. I don’t think we’re going to get out of it till 2022,” he said.
“GM has asked all their suppliers to order chips through the end of 2022. They are sending a message out that now is the time they have to prepare for 2022. They are trying to do damage control for 2021,” Conroy said.
In a bit of good news, GM said Thursday it is restarting production at a factory in Wentzville, Mo., that was idled in March.
The cold snap that hit Texas in February worsened the supply shortage by knocking two chip factories in Austin offline. On March 11, the owner of those facilities, NXP Semiconductors, said it had resumed operations. The interruption cost the factories about one month worth of production, NXP said.
Last week, Ford said plants in Dearborn, Mich.; Louisville; and Oakville, Ontario; would be down during various weeks in April, and that the company would cancel shifts at a variety of factories into June.
To try to make up for some of the lost production, Ford intends to run a number of its U.S. plants during the traditional summer shutdown period in late June and early July, Ford spokeswoman Felker said.