3,900 UAW Ford members building Escape, Corsair to be sent home due to parts shortage
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Thousands of UAW members will be off work next week as Ford Motor Co. shuts down its Louisville Assembly Plant, which builds the Ford Escape and Lincoln Corsair, because of an inability to get parts.
While COVID-19 hasn’t shuttered factories nationally, the pandemic continues to have impact on the supply chain.
“We are working closely with suppliers to address potential production constraints tied to the global semiconductor shortage,” Kelli Felker, Ford global manufacturing and labor communications manager, confirmed to the Free Press.
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The company has scheduled a “down week” next Monday through Sunday and notified the UAW, Felker said. She confirmed an estimated 3,900 workers would be affected.
“From what we are hearing right now, it’s (only) a week,” Todd Dunn, president of UAW Local 862, the union for hourly workers at the plant, told WDRB in Louisville
UAW members will receive approximately 75% of their gross pay during the down week, Felker said.
Automakers use chips for automation, electrification, digital connectivity and security — for everything from computer management of the engine to driver-assistance such as emergency braking.
Meanwhile, General Motors is monitoring the situation closely.
“We are aware of the increased demand for semiconductor microchips as the auto industry continues its global recovery,” said David Barnas, GM spokesman. “Our supply chain organization is working closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impacts on GM production.”
He declined to say whether operations had been disrupted.
A spokesperson for Fiat Chrysler Automobiles couldn’t be reached for comment.
“In the automotive sector, the adoption of safety-related electronics systems has grown explosively,” wrote Deloitte consulting in 2019. “Semiconductor components that make up these electronic systems will cost $600 per car by 2022.”
Autos vs. Apple
Global consolidation of vehicle production, driven by improving economies of scale and lowering costs, can dramatically affect supply chain challenges, said Joe McCabe, CEO of AutoForecast Solutions based in Chester Springs, Pennsylvania.
So Ford is not alone.
“In this case, as vehicles increase their electronic content and capability, they are not just competing with other vehicle manufacturers but now competing deeper with other industries needing the same resources,” McCabe said. “Expect to see this trend continue during the push for more automotive electrification.”
And when computers and phones need much more volume of semiconductors than vehicles, bottlenecks will occur; especially post-pandemic, he said.
Analysts expect vehicle manufacturers to allocate this scarcity of semiconductors to their more profitable vehicles at the expense of the less profitable ones, McCabe said. “Remember, the pandemic caused everyone to shut their doors. It did not discriminate between types of manufacturers. So as everyone’s doors reopen at the same time, the race for not only financial strength but long-term survival is paramount.”
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Now, semiconductor manufacturers will want to satisfy the backlog of their larger customer orders, leaving the automotive industry secondary in this equation.
“So companies like Apple entering the space may not seem so crazy after all,” McCabe said. “Just wait for the next generation of automotive players that will take shape as this issue accelerates.”
Volkswagen, too
Volkswagen Group, along with auto suppliers Continental and Bosch, on Dec. 4 warned about a shortage of semiconductor components needed for automotive production, Reuters reported.
“The pandemic has hit auto and auto parts production globally, and auto manufacturing has grown increasingly reliant on imported chips for electronic parts, such as electronic control units and electronic stability programs,” Reuters said.
Bosch, the world’s largest auto supplier, acknowledged to Reuters a shortage of certain semiconductor components globally.
Dutch automotive chip supplier NXP Semiconductors told customers that it must raise prices on all products because it is facing a “significant increase” in materials costs and a “severe shortage” of chips, Reuters reported.
Ford declined to discuss its supplier, as is protocol for companies.
Production disruption
Volkswagen said it would cut production in the first quarter of 2021 in China, Europe and North America because of a shortage of chips, as chip production strains to meet demand after pandemic-related cuts, the Wall Street Journal reported Dec. 18.
Dan Levy, analyst at Credit Suisse, wrote in a client note on Thursday that Honda was cutting auto production schedules “due to chip shortage.”
“All (companies) in our coverage noted continued COVID supply chain inefficiencies impacting operations,” he wrote. “While the end markets are clearly trending positively, it is nevertheless important to be mindful of COVID supply issues.”
On Friday, Levy wrote Nissan is now planning to cut production due to global shortage of semiconductors.
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Contact Phoebe Wall Howard at 313-222-6512 or phoward@freepress.com. Follow her on Twitter @phoebesaid. Read more on Ford and sign up for our autos newsletter.
This article originally appeared on Detroit Free Press: 3,900 Ford UAW members building Escape, Corsair lose work hours due to parts shortage