Ford said it would shut down production lines in Chicago next week; Kansas City, Mo .; and Flat Rock, Michigan, and will cease production in Avon Lake, Ohio.
The shutdowns will affect about 10,000 workers, said GM spokesman David Barnas. Ford didn’t say how many workers will be affected.
Union-represented GM workers an hour receive “about 75 percent of their compensation through a combination of unemployment and benefits,” Barnas said via email.
“We continue to work closely with our supply base to find solutions to our suppliers’ semiconductor needs and to reduce the impact on GM,” said Barnas. “Our intention is to make up as much production loss as possible in these plants.”
“All permanent employees with more than one year of service received about 75 percent of their gross wages in the last few weeks,” said Ford spokeswoman Kelli Felker by email.
The pandemic-induced chip shortage hit almost all major automakers and led to production cuts around the world, including Toyota, Volkswagen, Honda and others. The Chinese electric vehicle manufacturer Nio also temporarily stopped production in March.
According to the consulting firm AlixPartners, the global auto industry will produce 1.5 to 5 million fewer vehicles this year than originally planned due to delivery bottlenecks.
The production cuts “have the potential to make themselves felt in the economy” because when automakers shut down, “not only do they have to deal with their own workers, but they also have many suppliers who 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 variety of electronic devices, including cars, that use dozens of semiconductors to control airbags, windows, and other parts. Chips of all kinds were in short supply For months, a surge in demand far exceeded supply around the world and left manufacturers of all kinds in the lurch.
The White House was rely on large chip manufacturers and their host countries, including Taiwan, to increase production. It is also Call for $ 50 billion in federal funding to incentivize more domestic chip manufacturing, though that funding, if approved by Congress, would be too distant to address current bottlenecks.
The roots of the shortage lie in the early weeks of the pandemic when auto factories around the world were abruptly shut down due to orders that stay at home. Auto sales fell by almost half between February and April last year. As a result, automakers and their parts suppliers have drastically cut their semiconductor purchases.
At the same time, the demand for computers and other electronics increased as many consumers worked from home. This prompted electronics manufacturers to step up their chip purchases. As the demand for automobiles recovered, automakers found the semiconductor factories too busy with other business to meet their needs.
Chip factories cost billions of dollars to build or expand, so there is no easy way to get production up and running quickly.
The complexity of the automatic supply chains exacerbates the problem. GM alone buys auto parts from around 250 suppliers, who in turn buy chips from 11 different semiconductor manufacturers, said Ambrose Conroy, founder of Seraph Consultingadvising several automakers about the chip shortage.
“We’ll talk about the semiconductor problem for the rest of 2021. I don’t think we’ll end it until 2022,” he said.
“GM has asked all of its suppliers to order chips by the end of 2022. They are sending a message that now is the time to prepare for 2022. They are trying to implement damage control for 2021,” Conroy said.
In good news, GM said Thursday that production will resume at a factory in Wentzville, Missouri that shut down in March.
The Texas cold snap in February exacerbated the supply shortage by taking two Austin chip factories offline. On March 11th, the owner of these facilities, NXP Semiconductors, said it was back up and running. The interruption cost the factories about a month 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 the company would be canceling shifts in a variety of factories through June.
To make up for some of the lost production, Ford intends to operate a number of its US plants during the traditional summer shutdown period in late June and early July, Ford spokeswoman Felker said.