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Automakers Cut 2021 Production Targets In Wake Of Chip Supply Shortage: WSJ

Aditya Raghunath
·2 min read

The automobile sector in the U.S. is bracing up for a drop in output due to a shortage in the supply of chips, reports the Wall Street Journal. In addition to the semiconductor shortage, automakers are also witnessing setbacks like high absenteeism and shipping woes.

The WSJ noted that many of the automakers factored-in the impact of a lower chip supply and cut down their production forecasts in the first week of 2021. The chip shortage was initially noticed in Chinese factories and quickly cut through U.S. production.

Guidehouse Insights analyst Sam Abuelsamid told the Journal that modern cars have at least 40 different chips, with some high-end models having up to 150 chips, and "if even one has a production disruption, you can’t ship the car.”

This is how the chip shortage has impacted prominent automakers:

Ford: Automaker Ford Motor Company (NYSE: F) decided to hold off production in its Louisville plant in Kentucky for a week owing to the shortage of auto parts. Almost 3,900 workers from the plant will be laid off temporarily. The Kentucky facility produces two of Ford’s SUVs — Ford Escape and Lincoln Corsair. 

Ford stock closed 0.66% lower at $9 on Friday.

Volkswagen: German carmaker Volkswagen AG (OTC: VWAGY) revisited its production targets for the first quarter of 2021 in China, North America and Europe, according to an announcement in mid-December. The company’s models that operate on its MQB platform — like SKODA, SEAT, and other commercial and passenger vehicles including some models of Audi, will be impacted.

VWAGY closed at $20.79, 0.88% down on Friday.

General Motors:  General Motors Company (NYSE: GM) is planning to stock-up its chip inventory requirements for a whole year, the Journal report claimed based on a letter sent to GM suppliers. In the letter, a GM spokesperson reportedly said that the output was presently unaffected.

GM stock quoted at $43.06, with a 0.60% drop, at the end of trading hours on Friday.

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