Chip shortage makes Detroit automakers struggle to maintain truck production

Detroit automakers are struggling to keep production and truck shipments highly profitable, as interruptions in manufacturing around the world have led to a global shortage of semiconductor chips affecting the auto industry.

Ford Motor said Monday it is cutting a shift at Kentucky’s truck plant in Louisville, which produces its largest F-Series pickups and full-size SUVs. He is also temporarily closing a plant in Ohio that builds vans and other trucks. The two plants are expected to return to normal production within a week, according to the company.

The cuts come after Ford joined General Motors on Thursday to confirm it is partially assembling some trucks to store them until parts are available. Stellantis, formerly Fiat Chrysler, also recently confirmed that it was partially assembling some of its older Ram pickups due to a lack of semiconductor chips.

“We are working closely with suppliers to address potential production constraints related to global semiconductor shortages and are working to prioritize key vehicle lines for production, making the most of our semiconductor allocation,” the spokeswoman said. of Ford, Kelli Felker, in an emailed statement.

For months, automakers have prioritized the assembly of high-margin vehicles, such as pickups, reducing the production of cars and crossovers. The most recent actions show the difficulties that companies face in trying to maintain the production of these vehicles.

So far, GM and Stellantis have been successful in keeping truck production running longer than Ford, which previously reduced changes to its F-150 pickup truck.

Semiconductor chips are extremely important components of new vehicles for entertainment systems, power steering and brakes, among other systems. The pieces can contain various sizes and different types of chips.

Consulting firm AlixPartners predicts the shortage will reduce the global auto industry’s revenue by $ 60.6 billion. GM expects the problem to reduce its free cash flow by $ 1.5 billion to $ 2 billion this year. Ford said the situation could reduce its profits by $ 1 billion to $ 2.5 billion by 2021.

Automotive executives have characterized the situation as fluid. Stellantis CEO Carlos Tavares earlier this month said the shortage may not be fully resolved until next year. GM chief financial officer Paul Jacobson last month described the shortage as a “short-term” problem, saying the company expects to account for much of its production lost due to chip shortages in the second quarter. half of the year. Volkswagen of America CEO Scott Keogh told CNBC’s “Squawk Box” on Monday that the shortage would last until the fall, but “it’s something we’re navigating week to week.”

GM has temporarily shut down or cut production at several plants that produce cars or crossovers to prioritize production of its full-size pickups and SUVs. The Kansas and Ingersoll, Ontario plants are expected to remain closed at least until mid-April. They closed in early February.

“GM continues to leverage all available semiconductors to build and ship our most sought-after and popular products, including full-size trucks and SUVs to our customers,” GM spokesman David Barnas said in an emailed statement . “We haven’t taken downtime or reduced changes to any of our full-size truck plants due to shortages.”

Another GM plant in Mexico is expected to reopen in two weeks after it closed on Feb. 8, while a Michigan plant is expected to reopen in April after production stopped a week ago. GMO plants in Brazil and South Korea have also been affected by the shortage.