Semiconductor Shortage: Ford shuts down German factory for one month

Semiconductor Shortage: Ford shuts down German factory for one month
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US automaker Ford is closing down one of its factories in Germany for one month due to the ongoing semiconductor shortage globally.

According to Ford, it would halt production at its factory in Saarlouis, Germany, from January 18 to February 19 due to the global semiconductor shortage and weak demand. The facility produces the Focus, the firm’s most popular car in Europe, and has about 5,000 employees.

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A Ford spokesman said: “We are closely monitoring the situation and adjusting production schedules to minimize the effect on our employees, suppliers, customers and dealers across Europe.”

“At this time, we do not anticipate any similar actions at our other European facilities,” the spokesman added.

Semiconductor shortage and automakers

Last week, the shortage of semiconductors forced Ford to shut down a factory producing sport utility vehicles (SUVs) in Louisville, Kentucky. The succeeding closure of the German plant indicates that the shortage could get worse for carmakers across the globe.

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The shortage has been attributed to the move by leading semiconductor manufacturers in 2020 to reassign their capacity from automakers to producers of smartphones, gaming systems and other gadgets, as the coronavirus pandemic pushed down car sales while these items maintained high demand.

The average automobile uses between 50 to 150 semiconductors, particularly in driver assistance systems and navigation control.

Last month, Volkswagen said it will need to adjust production at plants in China, North America and Europe this quarter and this will affect production of the bestselling model, the VW Golf, as well as those from its Audi, Skoda and Seat brands.

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Volkswagen Group purchasing manager Murat Aksel explained: “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.”

According to Audi, it has furloughed 10,000 workers due to the chip shortage, which affected production and shift patterns at Germany and Mexico sites.

A spokesperson for Audi said: “We are currently looking at a range of countermeasures and alternatives designed to mitigate the impact of the supply bottleneck and, in turn, minimize the number of vehicles affected. Any improvement largely depends on the semiconductor industry.”

Outlook on the shortage

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

This shortage is expected to disrupt carmakers’ recovery as research firm Bernstein estimates global vehicle sales to increase 9% in 2021 following the 15% decline last year.

IHS also expects production levels in Europe, North America, Japan and India to be impacted by the shortage, but not in the same manner as China.

Fulthorpe warned: “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.”

Taiwan Semiconductor Manufacturing Company (TSMC), a major supplier of chips, assured that it is placing “top priority” on easing the shortage. TSMC CEO C. C. Wei said: “We are working closely with our automotive customers to resolve the capacity support issues.”