Auto chip shortage crisis worsens with BMW, Ford succumbing

Ford expects to lose 1.1 million units of production in 2021, resulting in an earnings hit of some US$2.5 billion. PHOTO: EPA-EFE

NEW YORK (BLOOMBERG) - The chip shortage is going from bad to worse for global automakers, with companies on three continents flagging production cuts in quick succession.

BMW finally succumbed to the shortage after months of managing to maintain output, saying it will pause Mini car production at its Oxford, England, factory for three days starting April 30. It's also reducing shifts at its plant in Regensburg, Germany, this week.

Honda Motor will halt production at three plants in Japan for around five to six days next month, a spokesperson said on Wednesday (April 28). And in the US, Ford Motor reduced its full-year earnings forecast due to the debilitating chip shortage, which it now sees extending into next year. All told, the shortage will likely reduce production by 1.1 million vehicles this year, John Lawler, the company's chief financial officer, said on a call with reporters.

The shortfall of critically needed semiconductors has forced the entire auto industry to cut output, leaving thin inventories at dealerships just as consumers emerge from Covid-19 lockdowns. Surging demand for phones, laptops and electronics during the pandemic has overwhelmed chip suppliers - Apple on Wednesday reported quarterly revenue that crushed Wall Street expectations, fueled by sales of the iPhone 12 line and purchases of iPads and Macs as people continue to work from home.

Tesla chief executive officer Elon Musk this week called the chip shortage a "huge problem." NXP Semiconductors said it's expecting supply to be tight all year and warned constraints for the auto industry could extend into 2022.

In just the past week, Jaguar Land Rover Automotiv, Volvo Group and Mitsubishi Motors have joined the list of carmakers idling factories. Consultant AlixPartners has said the chip shortage could cost automakers US$61 billion (S$80.8 billion) in lost sales this year.

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