Ford said it will idle production lines next week in Chicago; Kansas City, Mo .; and Flat Rock, Michigan, and will reduce production in Avon Lake, Ohio.
The shutdowns will affect about 10,000 workers, GM spokesman David Barnas said. Ford did not say how many workers will be affected.
Every hour GM workers, represented by a union, “receive about 75 percent of their compensation through a combination of unemployment and supplementary benefits,” Barnas said via email.
“We continue to work closely with our supply base to find solutions to our suppliers’ semiconductor requirements and to reduce the impact on GM,” said Barnas. “Our intention is to compensate for as much production lost on these plants as possible.”
“All permanent employees with more than a year of service receive approximately 75 percent of their gross salary over the course of weeks,” Ford spokeswoman Kelli Felker said via email.
The pandemic-related chip shortage has affected almost all major automakers, leading to production cuts worldwide that have also affected Toyota, Volkswagen, Honda and others. The Chinese manufacturer of electric cars Nine also temporarily stopped production in March.
The global automotive industry will produce 1.5 million to 5 million fewer vehicles this year than originally planned due to supply constraints, according to consulting firm AlixPartners.
The production cuts “have the potential to re-emerge” through the economy, because when automakers go idle, “they not only have to deal with their own employees, but they have many input suppliers who trust their business,” said Chad Bown, an economist with 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 have been in short supply for several months, as an increase in demand far exceeded supply across the globe, leaving producers of all kinds in dire straits.
The White House has relied on major chipmakers and their host countries, including Taiwan, to increase production. It also requires $ 50 billion in federal funding to encourage more domestic chip production, though those funds, if approved by Congress, would be too far away to remedy the current shortage.
The roots of the shortage lie in the early weeks of the pandemic when autoplants around the world suddenly shut down home orders. Car sales fell by almost half between February and April last year. As a result, car companies and their suppliers of parts drastically cut their purchases of semiconductors.
At the same time, the demand for computers and other electronics increased as many consumers started working from home. It prompted electronics manufacturers to increase their chip purchases. As auto demand bounced back, car companies found semiconductor factories too busy with other orders to fill their needs.
Chip factories cost billions of dollars to build or expand, so there is no easy way to quickly increase production.
The complexity of auto supply chains exacerbates the problem. GM alone buys car parts from about 250 suppliers, who in turn buy chips from 11 different semiconductor manufacturers, said Ambrose Conroy, founder of Seraph Consulting, which advises several automakers on chip shortages.
“We are talking about the semiconductor problem for the rest of 2021. I do not think we will get out of it before 2022, ”he said.
“GM has asked all of their 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 do damage control in 2021,” Conroy said.
In a bit of good news, GM said Thursday that it will restart production at a plant in Wentzville, Mo., which was idling in March.
The cold snap that hit Texas in February exacerbated supply shortages by knocking two chip factories in Austin offline. On March 11, the owner of these facilities, NXP Semiconductors, said it had resumed. The outage cost the factories a production value of about a month, NXP said.
Last week, Ford said plants in Dearborn, Mich .; Louisville; and Oakville, Ontario; would be down in different weeks in April and that the company would cancel shifts at a number of factories in June.
To try to compensate for some of the lost production, Ford intends to operate a number of its U.S. factories during the traditional summer closure period in late June and early July, Ford spokeswoman Felker said.