"Semiconductor Shortage Bites: Ford Cuts Q2 Production by 50%"

 Source:

https://wolfstreet.com/2021/04/28/ford-to-cut-production-by-50-in-q2-due-to-semiconductor-shortage/

"If an auto assembly plant runs out of just one component that couldn’t be delivered because the component maker had run out of one type of semiconductor

– of the thousands of semiconductors that go into a modern vehicle – the vehicle cannot be built, or cannot be finished and sold, and production halts.

That’s essentially the problem that the entire auto industry is now facing.

Ford, when it announced earnings ...
... included these whoppers:

    It expects to lose 50% of its planned production in Q2,
after having lost 17% of its planned production in Q1.

    The semiconductor shortage “will get worse before it gets better.”

    In the second half, it expects to lose 10% of planned production.

    For the whole year, it expects to lose 1.1 million vehicles of production, compared to prior estimates of production losses of 200,000 to 400,000 vehicles.

    Due to the semiconductor shortage, it expects an “adverse effect” to earnings before interest and taxes (EBIT) of $2.5 billion.

    “Like many others in the industry,” it expects that the global semiconductor shortage for the entire industry “may not be fully resolved until 2022.”

Ford expects the flow of semiconductors from its suppler in Japan to resume by the end of Q2, and that the issue would “bottom out” in Q2, “with improvement through the remainder of the year.”

... Its Dearborn assembly plant that builds the bestselling vehicle of all times that Ford totally depends on, the F-150 pickup truck, was shut down for two weeks in April.

The Kansas City plant that also builds the F-150 and the bestselling cargo van, the Transit, is still in a one-month shutdown.

Its plant in Chicago that assembles the Explorer has been shut down nearly all April and won’t restart production until sometime in May.

This semiconductor shortage that is now crushing output in the auto industry is another element that will muck up the inflation picture.

Used vehicle prices have already spiked in a historic manner.

And when new vehicles are in short supply and any deals are just faint memories ...

But used vehicles are also starting to be in short supply because the rental car companies slashed their orders last year and now don’t have enough vehicles to remove from service and put on the wholesale market to feed the used vehicle retail supply.

... No one was ready for the tsunami of stimulus money that washed in waves over American consumers that caused a historic spending spree on durable goods.

Many of those durable goods contain chips.

And now there is a global chip shortage.

This surge government-goosed consumer spending produced all kinds of distortions ... "