US automakers see semiconductor shortage persisting through 2021

US automakers expect supply issues due to the global shortage of semiconductor chips to persist throughout 2021 and are putting in long-term solutions to de-risk their supply chain, executives say.

The issue of semiconductor supply remains fluid, General Motors CEO Mary Barra said Aug. 4 during the company’s Q2 earnings call. Barra’s comments come a day after GM said it would be taking a one-week outage at three of its North American full-size pickup truck assembly plants due to the chip shortage.

Growing coronavirus cases in Malaysia have caused further disruption to the company’s ability to source semiconductors, Barra said.

“While we informed our employees yesterday that some truck production will be impacted next week, even as we resume production at some crossover plants, we remain confident in our team’s ability to continue to find creative solutions that minimize the impact on our highest-demand and capacity-constrained vehicles, including full-size trucks and SUVs,” she said.

GM is putting in place long-term solutions to avoid such issues in the future and is collaborating with semiconductor manufacturers to enhance transparency in the supply chain, she said.

GM CFO Paul Jacobson said the company was able to pull forward some chip availability into Q2 from Q3, helping to offset production disruptions.

“We have continued to believe that as we get into the fourth quarter, some of the underlying semiconductor challenges are going to start to abate,” Jacobson said. “We don’t know that it will be fully resolved then, but we’re being cautious and we’re seeing signs for improvement.”

During its Q2 conference call in late July, Ford executives said the chip constraints have led to permanent changes in the company’s go-to-market strategy.

“We’re placing greater emphasis on build-to-order sales bank, not just low stocks,” Ford CEO Jim Farley said during the company’s Q2 call on July 28. “We have learned that, yes, operating with fewer vehicles on lots is not only possible, but it’s better for customers, dealers, and Ford.”

Ford is seeing some signs of improvement in the flow of chips at the start of Q3, however the situation remains fluid, Farley said.

“We do see that the chip issue running through this year, and we could see it bleeding into the first part of next year,” Ford CFO John Lawler said. “But I think we won’t really have a good feel for that, until later in this year.”

Chip suppliers have indicated in discussions that they are reallocating capital and increasing supply to the automotive market, he said, however these investments will take time.

“I think this is one of those things where we need to see the release coming through before we can really feel comfortable that we’re out of the woods here,” Lawler said.

— Justine Coyne