Chip shortages have Detroit automakers struggling to maintain truck production

Detroit automakers are struggling to keep production and shipments of pickups highly profitable as disruptions in manufacturing worldwide have led to the global shortage of semiconductor chips that is affecting the automotive industry.

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

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

“We are working closely with suppliers to address potential production constraints linked to the global scarcity of semiconductors and to prioritize key vehicle lines for production, making the most of our semiconductor allocation,” said a Ford spokeswoman. , Kelli Felker, in an e-mailed statement.

For months, automakers have prioritized the assembly of high-margin vehicles, such as pickup trucks, cutting the production of cars and crossovers. The most recent actions show the difficulties faced by companies in trying to maintain the production of these vehicles.

So far, GM and Stellantis have been successful in keeping truck production up and running more than Ford, which previously cut shifts from its F-150 pickup.

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

Consulting firm AlixPartners predicts that the shortage will cut $ 60.6 billion in revenue from the global automotive industry this year. 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 earnings by $ 1 billion, to $ 2.5 billion in 2021.

Automotive executives characterized the situation as fluid. Stellantis CEO Carlos Tavares earlier this month said the shortage may not be fully resolved until next year. GM CFO Paul Jacobson last month called the shortage a “short-term” problem, saying the company hopes to recover much of its lost production due to the shortage of chips in the second half of the year. Volkswagen of America CEO Scott Keogh told CNBC’s “Squawk Box” on Monday that the shortage is likely to last until the fall, but “it’s something we navigate week after week”.

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

“GM continues to take advantage of all available semiconductors to build and ship our most popular and in-demand products, including large trucks and SUVs to our customers,” said GM spokesman David Barnas in an email statement. “We have not reduced downtime or reduced shifts at any of our large truck factories due to shortages.”

Another GM plant in Mexico is expected to reopen in two weeks after being closed on February 8, while a plant in Michigan is expected to reopen in April, after stopping production a week ago. GM’s factories in Brazil and South Korea were also affected by the shortage.