Semi Shortage Stings Ford, Forcing More Layoffs And Shift Reductions

Automakers are in the midst of dealing with two major supply chain crises at once. First, they are still dealing with the remains of a global supply chain lockup that occurred as a result of Covid-19. And more recently, they have been dealing with a semiconductor shortage, which we have covered extensively on Zero Hedge, that has forced some manufacturers to shutter and slow down production. 

Now, Ford has announced it is making even more production cuts and temporary layoffs at its Chicago Assembly Plant. The most recent round of layoffs is being attributed to the supply chain disruptions in semiconductors, according to The Pantagraph. 

The affected plants, which will be subject to layoffs or shift reductions, are:

• Dearborn Assembly Plant, which makes the F-150 pickup.

• Kansas City Assembly Plant, which makes the F-150

• Louisville Assembly Plant, which makes the Ford Escape and Lincoln Corsair

• Chicago Assembly Plant, which makes the Explorer, Police Interceptor and Lincoln Aviator

“At the Chicago Assembly Plant, two shifts will be laid off next week,” the report says. 

A letter written by UAW Local 551 Chairman Coby Millender that has been circulating in Chicago warns workers to be wise with their finances:

“The company has informed us that beginning next week, they want to have B and C crew laid off initially for one week with a strong potential for additional weeks. It’s totally based on how soon the supplier resolves this issue. I just wanted to make you aware 551, so that you can begin to plan accordingly. Be wise with your finances.”

Recall, we wrote just days ago how the industry was “panicked” about the semi shortage. Major players like VW, Toyota and GM are still suffering from a shortage of chips that are becoming more common in everyday vehicles, we noted. The drain on the supply chain has come from a corresponding rise in the sales of gaming consoles, TVs and computers – mostly as a result of the pandemic. The chips are now being used in everything from vehicle entertainment centers to anti-lock brakes. 

Carlos Tavares, chief executive of Stellantis, told the Financial Times: “I am here to protect the fact that my company is treated fairly. I will look for all possible solutions. If I need to I will fight back [to ensure its chip contracts are met].”

The unexpected disruption is the first time the industry has truly thought long and hard about the supply chain it uses for semiconductors. Only about 10% of semiconductor fabrication plants are used for automotive parts, FT notes. Since there is no “quick fix”, the shortage is expected to drag on for “at least” 6 months. Companies like Taiwan Semiconductor are, at the same time, still trying to address fallout from U.S. sanctions. 

One China based supplier told FT: “The sanctions meant some clients redirected their orders from SMIC to other places, such as TSMC. Inside the industry, we are all pretty panicked, because the scope of the chip shortage is too big, and affects too many types. In the short term, we can’t see any way of resolving it.”