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Ford closes German plant for 1 month as global chip crisis worsens

Posted January 18, 2021 8:32 a.m. EST

— Ford has ordered a month-long production halt at one of its plants in Germany, the latest sign that a global shortage of computer chips is putting carmakers under increasing pressure and threatening their recovery from the pandemic.

The US automaker said it would idle its factory in Saarlouis, Germany, from Monday until February 19 because the chip shortage and weak demand. The plant makes Ford's most popular car in Europe, the Focus, and employs around 5,000 workers.

"We are closely monitoring the situation and adjusting production schedules to minimize the effect on our employees, suppliers, customers and dealers across Europe," said a Ford spokesman. "At this time, we do not anticipate any similar actions at our other European facilities."

Ford was forced to close a SUV plant in Louisville, Kentucky last week because of the shortage of semiconductors. But the shutdown in Germany suggests the problem, which is affecting carmakers around the world, could get worse before it gets better.

Leading semiconductor manufacturers reassigned capacity from automakers last year after the pandemic slashed car sales, instead shipping chips to companies that produce smartphones, gaming systems and other tech gadgets that remained in high demand. Supplies are still tight, and carmakers are struggling to secure the chips they need.

Volkswagen, Fiat Chrysler, Toyota, Nissan and Honda are among the other automakers suffering from the shortage of chips, which are used in a growing number of applications including driver assistance systems and navigation control. The average car has between 50 to 150 chips.

"Light vehicle manufacturers are finding increased disruption to the supply of systems using semiconductors in the first quarter," Mark Fulthorpe, executive director for the automotive team at IHS Markit, said recently in a research note. "The situation is highly fluid."

The disruption comes at a crucial time for carmakers, which suffered a collapse in sales in the early months of the pandemic, yet remain under intense pressure from global regulators to invest heavily in electric cars. Research firm Bernstein estimates global vehicle sales will grow 9% in 2021, following an expected 15% decline last year — but the chip shortage is putting the recovery at risk.

Volkswagen said in a statement last month that it will need to adjust production at plants in China, North America and Europe this quarter. The changes will affect production of the bestselling VW Golf, as well as models from its Audi, Skoda and Seat brands.

According to UBS analysts, the world's largest carmaker could lose out on production of 100,000 units in the first three months of the year, or roughly 4% of global quarterly output, as a result of the components shortages.

"We are doing everything in our power to minimize lost production and to ensure that normal deliveries to customers can be resumed as rapidly as possible," Volkswagen Group purchasing manager Murat Aksel said in a statement last month.

Audi CEO Markus Duesmann told the Financial Times in an interview published Sunday that 10,000 workers have been furloughed because of the chip shortage, but he said the luxury brand would try to limit production losses to 10,000 cars during the first quarter. Audi representatives did not immediately respond to a request for comment on Monday.

Fiat Chrysler said last week that it would delay the restart of production following a scheduled break at its Toluca, Mexico plant, which builds the Jeep Compass. It has also scheduled downtime at its Canadian plant in Ontario, which produces the Chrysler 300, Dodge Charger and Dodge Challenger.

Japanese carmakers are also hurting. Toyota said it was forced to temporarily halt production at a plant in Guangzhou, China on January 12, and it's cutting production at a Texas factory that makes Tundra pickup trucks. Nissan and Honda have both said they're "adjusting" production in response to the shortage.

South Korea's Hyundai said in a statement on Monday that it's "making effort to optimize supply of parts to ensure stable production at each production hub."

German luxury brand BMW said last week that it has not yet had to contend with interruptions to production but is in "constant contact" with its suppliers. General Motors and France's Renault have said they are working with suppliers to mitigate the impact on production, while Daimler-owned Mercedes-Benz said it is "monitoring the situation."

Chinese factories may be worst affected

Production levels in Europe, North America, Japan and India are expected to be hit this quarter, according to IHS. But the biggest problem could be in China.

"At this stage, with varying levels of visibility across the supply chain, the biggest volume disruption is noted in mainland China where, based on available information, the risk could be 250,000 units in the first quarter," said Fulthorpe.

Chinese carmakers Brilliance Auto Group, SAIC Motor and Geely, which owns Volvo, did not immediately respond to requests for comment on Monday.

Taiwan Semiconductor Manufacturing Company (TSMC), a major supplier of chips, said last week that easing the shortage is its "top priority." "We are working closely with our automotive customers to resolve the capacity support issues," CEO C. C. Wei said at an investor conference on Thursday.

— Jake Kwon, Junko Ogura, Jill Disis and CNN's Beijing bureau contributed to this article.

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