From chips to seating foam to plastics, parts shortages continue to cripple auto industry



Parts shortages are crippling an auto industry still struggling to bounce back from last year’s pandemic production shutdowns — and the situation is growing worse as the problem spreads from microchips to seating foam and plastics.

The biggest problem has been a shortage of the chips used to control everything from powertrains to digital safety systems. That has resulted in closures or production cuts by many of the industry’s largest manufacturers in the past few weeks, including General Motors, Honda, Nissan, Volkswagen, Ford, Toyota and Stellantis.

“We continue to manage a number of supply chain issues related to the impact from Covid-19, congestion at various ports, the microchip shortage and severe winter weather,” Honda said in a statement, adding that, “In some way, all of our auto plants in the U.S. and Canada will be impacted, with most of the plants temporarily suspending production during the week of March 22.”

The shortages have meant Ford has been forced to cut a shift at its Kentucky Truck Plant, which produces its Super Duty pickup trucks, the Ford Expedition and Lincoln Navigator, until the week of March 29. Another Kentucky assembly plant, in Louisville, is expected to reopen Tuesday after shuttering last week due to chip shortages. Nissan has cut back or canceled production of models including the Murano and Rogue SUVs, Leaf crossover and Maxima sedan. Toyota has trimmed production of popular models including the Camry sedan and RAV4 SUV, in the U.S. and Mexico.

Volvo, which has been impacted at the South Carolina plant producing its S60 sedan, said in a statement on Monday that the chip shortage “will have a substantial impact on the Volvo Group’s production in the second quarter.” Volvo said it will implement “stop days” of between two and four weeks but that “the disturbances are expected to have a negative impact on earnings and cash flow.”

General Motors has faced stop-and-go production problems in recent weeks when its own microchip supplies ran short. The automaker attempted to work around the problem at one plant by redesigning an engine control module for its Chevrolet Silverado and GMC Sierra pickups. While the vehicles still meet federal emissions standards, the workaround reduces their fuel economy by about a mile a gallon, GM confirmed.

Today’s cars can use 100 or more microprocessors, making the industry particularly vulnerable to supply disruptions. The crisis was triggered by last year’s pandemic production cuts, when chipmakers found strong demand from consumer electronic companies experiencing booming demand for everything from TVs to smartphones to webcams during Covid lockdowns.

Chip manufacturers say they don’t have the capacity to quickly ramp up production for the auto industry as car sales recover. President Joe Biden last month called for $37 billion in new funding “to work with industrial leaders to identify solutions to the semiconductor shortfall.” He also signed an executive order calling for a 100-day review of supply chains. It’s unclear how soon any of these measures might boost production and help refill the order pipeline.

Adding to the crisis, some manufacturers are running out of critical petroleum-based products, after the recent freezing weather in Texas led to shutdowns of key petrochemical plants. Industry analysts anticipate shortages in plastics and petroleum-based automotive products, especially seating foam.

The shortages come at a particularly tough time for the auto industry. North American manufacturing was halted for roughly two months last spring due to the pandemic. Since reopening, automakers have struggled to refill showrooms. Inventory on U.S. dealer lots is down by at least a million vehicles compared to what would be normal this time of year, according to J.D. Power research company.

Consumers are feeling the pinch in several ways, analysts note. Buyers may find it harder to locate the exact model they want, especially when it comes to color and accessories. With supplies short, meanwhile, automakers have cut back on incentives while salespeople have less need to cut deals.

But idling production and reducing sales will have a big impact on the industry’s collective bottom line. Ford warned that the chip shortage alone could reduce earnings by anywhere from $1 billion to $2.5 billion this year. General Motors put its own number at $2 billion. While Honda did not put out a dollar figure, it warned last month that it expects to sell about 100,000 fewer vehicles worldwide this year due solely to the chip shortages.



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