HOUSTON (ICIS)--US automakers are expecting to feel the brunt of production cuts related to the global shortage of semiconductors in the second quarter, with one major producer saying it expects total production to fall by 50% in Q2.
In comments made during conference calls to discuss first-quarter earnings, the CEOs of US automakers Ford Motor Co and General Motors said they expect second-quarter production to be the low point of the year.
“We expect Q2 to reflect the largest impact of the production disruptions resulting from supply shortages,” Mary Bara, GM Chairman and CEO, said on Wednesday.
Ford CEO Jim Farley told investors that the company was likely to lose about 50% of its projected Q2 production.
He said Q1 production was down by about 17%, or 200,000 units.
“The semiconductor shortage and the impact to production will get worse before it gets better,” Farley said. “In fact, we believe our second quarter will be the trough for this year.”
Farley added that he expects second-half production to also come up short of projections.
“While we expect the flow of chips from Renesas to be restored in July, we and many in the industry now believe the global shortage may not be fully resolved until 2022,” Farley said. “So, our outlook now assumes we lose roughly 10% of planned second-half production. In total, we believe the shortage for the year will drive a loss of about 1.1m wholesale units.”
The automotive industry is a major global consumer of petrochemicals which contribute more than a third of the raw material costs of an average vehicle, and production disruptions could severely weigh on demand.
The industry, which was forced to shut most production in March 2020 because of the coronavirus pandemic, has seen a volatile recovery.
Initially, demand surged – especially in China – largely on pent-up demand coming out of lockdown measures to help stop the spread of the coronavirus.
But semiconductor manufacturers struggled to meet the uptick in demand.
A fire in March at Japan's Renesas, the world’s third-largest automotive semiconductor company, has intensified the shortage.
Renesas has restarted production at the site, but it will be some time before it hits maximum capacity.
The chipmaker said that production restarted on 17 April, but at just 10% capacity compared with before the fire.
“We aim to recover the capacity to 30% by the end of this week, 50% by the end of April and return to 100% by the end of May,” the company said.
Automakers have dealt with the shortage by prioritising chips for their most popular models.
A market participant told ICIS that Ford is currently building F-Series trucks and holding them on-site until modules requiring semiconductors are delivered.
Ford said during its call that about 22,000 vehicles, primarily in North America, have been assembled and are awaiting installation of chip-related components.
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