Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) have confirmed that they have decided to stop production at two Michigan plants because of the parts shortage. Both the companies have separately confirmed the news of the production pause. The auto sector is dealing with a global chip scarcity caused by the COVID-19 outbreak, which has forced businesses to restrict production, despite the financial impact being largely mitigated by high car prices.
Due to a global semiconductor shortage, Ford, the world's second-largest carmaker, has announced that production at its Flat Rock Assembly Plant, where the Mustang is produced, will be halted next week. On the other hand, GM announced that production at its Lansing Grand River assembly, where the Cadillac CT4, Cadillac CT5, and Chevrolet Camaro are built, will be halted next week due to a temporary part shortage. GM stated that the manufacturing pause was unrelated to chips but gave no other details.
Last month, Ford stated that the chip shortfall will cause a drop in vehicle sales in the current quarter. Due to a chip shortage, Ford paused production at its Kansas City assembly plant, which produces F-150 pickup trucks, for a week last month. Ford, based in Dearborn, Michigan, indicated that manufacturing at its other North American operations will resume as usual.
Additionally, due to a semiconductor chip shortage, GM announced last week that production at a plant in Fort Wayne, Indiana, makes the Chevrolet Silverado 1500 and GMC Sierra 1500 pickup trucks will be halted for two weeks starting April 4. According to J.D. Power and LMC Automotive, the annualized rate of new car sales will surpass 12.7 million cars in March throughout the industry. That's a drop of more than 1 million units from February and more than 5 million units from March 2021.
Lower sales are mostly due to supply constraints caused by pandemic-related chip and part shortages. Analysts claim that demand is still strong. The current conflict between Russia and Ukraine is causing new concerns. According to Jessica Caldwell, an Edmunds analyst, the mix of challenges could ensure inventory concerns persist well into 2022.