Industry-wide issue “may not be fully resolved until 2022”
By Wolf Richter for WOLF STREET.
If an auto assembly plant runs out of just one component that couldn’t be delivered because the component maker had run out of one type of semiconductor – of the thousands of semiconductors that go into a modern vehicle – the vehicle cannot be built, or cannot be finished and sold, and production halts. That’s essentially the problem that the entire auto industry is now facing.
Ford, when it announced earnings this evening, shed more light on what the global semiconductor shortage, “made worse” by the fire in March at a plant of a semiconductor supplier in Japan, means in terms of lost vehicle production and lost dollars.
It included these whoppers:
- It expects to lose 50% of its planned production in Q2, after having lost 17% of its planned production in Q1.
- The semiconductor shortage “will get worse before it gets better.”
- In the second half, it expects to lose 10% of planned production.
- For the whole year, it expects to lose 1.1 million vehicles of production, compared to prior estimates of production losses of 200,000 to 400,000 vehicles.
- Due to the semiconductor shortage, it expects an “adverse effect” to earnings before interest and taxes (EBIT) of $2.5 billion.
- “Like many others in the industry,” it expects that the global semiconductor shortage for the entire industry “may not be fully resolved until 2022.”
Ford expects the flow of semiconductors from its suppler in Japan to resume by the end of Q2, and that the issue would “bottom out” in Q2, “with improvement through the remainder of the year.”
CFO John Lawler said during the earnings call that Ford had 44 days of supply of vehicles on dealer lots at the end of Q1. In the industry, about 60 days’ supply would be about right. But the production cuts are going to make the inventory situation a lot worse.
Ford has already announced numerous plant shutdowns and shift eliminations so far this year. Its Dearborn assembly plant that builds the bestselling vehicle of all times that Ford totally depends on, the F-150 pickup truck, was shut down for two weeks in April. The Kansas City plant that also builds the F-150 and the bestselling cargo van, the Transit, is still in a one-month shutdown. Its plant in Chicago that assembles the Explorer has been shut down nearly all April and won’t restart production until sometime in May.
This semiconductor shortage that is now crushing output in the auto industry is another element that will muck up the inflation picture.
Used vehicle prices have already spiked in a historic manner. And when new vehicles are in short supply and any deals are just faint memories, with some dealers selling some vehicles over sticker even, as we now hear, demand will shift to used vehicles.
But used vehicles are also starting to be in short supply because the rental car companies slashed their orders last year and now don’t have enough vehicles to remove from service and put on the wholesale market to feed the used vehicle retail supply. And as the semiconductor shortage drags on, and new vehicle production gets slashed further, the used vehicles market is entering deeper turmoil.
The semiconductor shortage that was then made worse by the semiconductor plant fire in Japan and by the semiconductor plant shutdowns in Austin due the snowmageddon is hitting an industry that had already been tangled up in massive distortions, supply chain issues, and production issues due to the Pandemic.
No one was ready for the tsunami of stimulus money that washed in waves over American consumers that caused a historic spending spree on durable goods. Many of those durable goods contain chips. And now there is a global chip shortage.
This surge government-goosed consumer spending produced all kinds of distortions and problematic records. Read… Imports and Trade Deficit in Goods Explode to Worst Ever, Powered by Stimmies and Decades of Rampant Offshoring
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Speaking of chips, J-Pow said to put all your chips into the stock markets today, according to CNBC Pro article titled:
“Fed Chair Powell gives stocks the all-clear to keep moving higher”
———————–
At some point, infinite money printing will outpace finite resources…and so what is the point of going past the point of no return???
That said, party on Wall Street as the Fed is a money printing psychopath…
I watched the presser. He was asked by a reporter if they’re “thinking about thinking about tapering.” And JPow said, “No.” But he sure as heck did a lot of TALKING about tapering. Tapering was the main topic of the entire press conference.
That was to throw off the word count algorithms.
The algorithms aren’t real good with satire either.
Wolf – The link to that presser would be helpful. I saw most of it but not all.
I watched the live-stream and you cannot link to it and see anything now. It takes a while for them to turn this into a video, but they always do. And you can watch the video now. Google: youtube federal reserve — and you get the YouTube Channel of the Fed, and all the videos.
Wolf
It would be too painful to watch this bull s$it presentation one more time. Reading it would be a little less painful, but not much. I’ll take a pass. Thanks anyway
I’m with you…
Whoever writes the CNBC headlines is a moron. While I dislike Powell immensely, that’s not even close to what he said.
Agreed.
Powell was reading from talking points if you watched him. Many of the times he never even answered the question. He couldn’t even keep his lies straight.
He reacts that way I assume when the committee boxes him in on the subject. In this case everyone has a pet cause, and jockeying for position when Powells’ tenure ends. Not much about “forward guidance”, the market was hanging on that a few months ago. Guidance on tapering is subject to revision. Powell is a repub and repubs are being cut out of the process. Fiscal policy has replaced monetary policy. Yields rising despite Treasury lowering supply, is very spooky.
I watch CNBC in the morning just to see what the enemy is saying and doing. Ms Swamp gets mad at me for doing this and giving them ratings but to win a war sometimes you have venture into the enemy’s camp and find out what they are thinking. You can’t always listen to those who support your own views.
For example, a guest the other day parroted J Powels thinking that no tapering would occur until wage inflation got over the 2% level, but CPI inflation above 2% would be tolerated and in fact encouraged. In other words, as long as the working stiffs are the ones getting hosed and the top 1% are doing great then everything is OK. Not a single host on the show even challenged the guest. That includes both the liberal and conservative hosts.
Mr. Powell did not say ” Jump into the markets”; he categorically stated that the Fed will react to the spending plans of Congress. If President Biden’s bills are all or in part, passed then one can surmise that inflation MAY be the result, with the Fed presses printing $$ and pent up buying demand. However, he strongly underlined that inflation would be temporary and the U.S. would return to a normalized basis after the initial pent-up demand for goods runs its cycle. Mr. Powell is making the issue of inflation the battle zone. As far as cryptocurrencies, his speech included the dollar as the world’s reserve currency and no Bitcoin can be used in transfers; all he did say, was the Fed would look at the issue.
I remember when zerohedge used to have articles about car dealerships being stuffed with inventory. Maybe they’re just burning some of that off. Something about all of this seems…… off
That was then, and this is now.
This is now, but really nothing has changed since 2008. The system is still bankrupt, just a matter of admitting it. My entire adult life has been one long weekend at bernies.
We still have fund managers on wall st jumping out of windows, then it was from bankruptcy, investors walking away from hard core price to book value funds that werent buying the latest $hitcoin…
Moral hazards will continue be ignored until it slaps ‘em in the face.
Position accordingly
Perfect image for our ridiculous civilization circling the drain.
This smells like all kinds of “shortages” including 1970s OPEC crude “shortages”. Some industry chest pounding going on? Need price increases not achievable via other means? Geopolitical chess move? Am I seeing things that aren’t there?
A perfect illustration of our lack of priorities and unintelligent spending. We have spent trillions of dollars on military spending making enemies worldwide while accomplishing nothing more than propping up the fiat petro-dollar while at the same time allowing our country to become unreasonably dependent on foreign countries to complete our supply chain.
What happens when the dollar finally collapses and there are no more cheap imported goods. A cluster f$ck is what it will be.
You will then do without.
America is blessed by being food independent and energy independent.
So you won’t starve to death in the dark.
Your diet may be pretty bland and you won’t have the toys and trinkets, but you will survive.
True. Americans could be toys and trinkets poor, but y’all could still sing around the campfire for fun. Not even joking.
We won’t be energy independent much longer.
2banana
Food independent???
Have you checked the source of much of the produce in the supermarkets lately? Mostly Latin America and Mexico. With the climatologists forecast of a potential drought in the West and subsequent water shortages affecting the farmers and domestic food supply you may want to revise that statement.
2B
If you can make money on fracking at 4% cost of capital then good luck on being energy independent.
Cross your fingers Powell is right.
Haven’t you heard? Military spending doesn’t cause deficits – Social Security and Medicare does. And tax cuts for corporations and the rich increases revenue and balances budgets.
“tax cuts for corporations and the rich” is a politically charged term. “Tax cuts and jobs act” did increase tax revenues. Along the trend line in the first year. Awesomely the next.
Not starting a new endless war saves us trillions of dollars. Very thankful to president Trump for that.
“Military spending doesn’t cause deficits – Social Security and Medicare does.”
All the G programs do…and a large percentage of them are run like absolute sh*t.
But DC has no incentive and therefore no interest in restraining the wealth it routes through its hands, handing it power and control.
But at every step of the multi-decade clusterf*ck, DC knew it could use dollar printing fraud to evade the consequences of its profitable, habitual failure.
Their failure, our inflation.
C
US spends 10x more than Russia & China on bombs & bullets but Putin says the Pentagon pays $300 for a hammer!
timbers
You forgot to add
The 1 trillion F-35 joint strike fighter program that doesn’t work doesn’t cause deficits.
Not cutting a single bloated federal agency doesn’t cause deficits.
Creating a new Military Command “Space Force” with all the associated staff and buerocracy doesn’t cause deficits.
The Unfunded 2017 Tax cut and jobs act doesn’t cause deficits.
Leaving troops in IRAQ and AFGHANISTAN for 20 years doesn’t cause deficits.
Leaving 35,000 troops in Germany 60 years after the end of WWII, Korea and other NATO countries doesn’t cause deficits.
The list goes on, Need I say more
Nice list.
Agree with most of it except for “Tax cut and jobs Act” being unfunded. You can look up the tax revenue numbers yourself.
When government takes less from what you make, that’s the simplest form of economic stimulus. Proof of economic growth and increased revenue is in the numbers.
So Ford production is getting slaughtered and stock goes down .50 cents a fool born every day
If you can only produce 50% you are going to sell the more expensive/profitable models and with a higher mark up. It is not so much a profit problem but a repeat customer problem. If you are a loyal Ford buyer and Ford has no car you go to the competition
char,
Would be nice, and they’re trying, but they already shut down the plants that produce their most profitable high-margin vehicle, the F-150.
Wolf, would you comment based upon your far past what affect this will have on new car dealers. Are the higher margins and finance stuff enough to offset the volume lost.
R Hughes,
There are two different dynamics at work, for new vehicles and for used vehicles.
New vehicles: Automakers price new vehicles when the model year comes out. And the price the dealer pays stays the same for that model year. Automakers also offer incentives to the dealer and to retail customers that will change the equation. In the current environment, the beneficiaries of the wealth effect and working-from-homers are buying upscale, and discounts have dwindled or disappeared. There are stories that people are now often paying over sticker for trucks. This combination of fixed input costs (that were determined last year) and high selling prices generates HUGE gross profits. And we have seen this in the quarterly reports by AutoNation.
Used vehicles: Dealers obtain used vehicles either as trade-in or by buying at auctions. And in both, prices have skyrocketed. So used vehicle dealers are paying more for their cars; and now they need to charge more to protect their gross profits. What I’m hearing is that customers are willing to pay more, and that gross profits are very juicy.
Ron,
Yeah, I saw that 3% dip afterhours and I thought, hmmm.
Ford TTM P/E ratio: N/A
Tesla TTM P/E ratio: 696
Based on P/E ratios, Ford is more expensive than Tesla.
How can a company the sells all those expensive F-150’s have negative earnings?
Maybe they just have to pay Huge license fees for IPR to some entity located in a place with very little taxation and dubious records of ownership, like Delaware, Gurnsey or Malta?
There is an older saying.
You can print more and more fiat (dollars, etc.)
But you can’t print a corn chip and you can’t print a computer chip.
Eventually, folks want something real for their day of labor or to buy their wares.
swamp creatures comment on the dependence on Taiwan for chips seems to have aborted.
SK Hynix is building a $100 billion worth of semiconductor fabs in Korea. Other semiconductor fabs will be built in the U.S.
Yes, but this comes a little late.
According to Intel’s CEO, the company will begin supplying the automotive industry with components in 6-7 months.
@David Hall
Read TSMC Founder talking about the problems of building a fab in Arizona
His lack of enthusiasm is pronounced
I have often wondered, just how painful does it have to get for American businesses to relocate or insource critical manufacturing back to the states.
I guess a loss of 50% production isn’t painful enough.
They aren’t “American” businesses anymore. They go where they can exploit the most and pay the least. They care not for Americans, and now with a lot of their virtue signaling of the past five years one could even argue they’re trying to kill what remains of our civil religion. Its almost like they want everyone to fight each other. Didn’t Jay Gould say i can pay one half of the working class to kill the other half? That is what it feels like. Can you imagine going into a church of any denomination and telling the worshipers that they’re all evil and bad because of things that happened 200 years ago? That is essentially what the media and “american” corporations have been doing every single day for quite some time.
“Can you imagine going into a church of any denomination and telling the worshipers that they’re all evil and bad because of things that happened 200 years ago? ”
Yes, it’s called original sin. Goes back to Adam and Eve. Happens in every Christian church every Sunday, coast to coast.
Seeking Alpha
Semiconductor shortages ..
shipments began dropping in Q1 2020 due to COVID-19 & automakers reduced production & chip purchases .. Shipments reached a low in June .. followed to an increase to September 2020 .. & then a drop from October through December as the second wave of COVID-19 hit.
In tandem, the work/study stay at home edict resulted in increased demand of PC’s .. remote video conferencing .. game stations & server bandwidth which created demand for semiconductors for these applications in the absence of automotive demand.
I remember when a company I worked for, “General Magnetics”, was bought by and completely moved to….China. It was very painful for the employees, unless you agreed to move to China.
It is too painful. The supply chain is structured in such a way that you’d literally have to dismantle all of it and put it somewhere else.
Consider the iPhone. You have factories of suppliers built right next to the factories of their customers. Who are then built next to the factory of their customers. Consider Foxconn, they build the iphone, but they need to have the camera modules built too, they don’t do all of it. So, they have partners that co-locate their factory in the same industrial park. Those partners have to make the modules, but they have to get the electronics, optics, and the metal housing, etc elsewhere, cause they don’t make them. Those partners are in turn set up in the same business park, and so on down. That’s just one facet, then you have to think about the LED modules, and the laser modules in the iPhone. Same problems.
The only thing that hasn’t been done is putting the whole industrial park right next to a mine that extracts the raw material, and then having the airport in the same area so you can ship it out from inner Mongolia for example. Now, you can’t do this everywhere, but China has done a really good job of co-locating and setting up these factories.
So, this Wisconsin thing with Foxconn was really a running joke. Only idiots actually thought it would be meaningful. Cause Foxconn would have to spend an ass load of money just moving the raw material to Wisconsin, and then to move it out again to the next point of the supply chain.
The entire idea of shifting to Vietnam or India is an exercise in pain. It can be done and is mandated, but it’s hard as hell. Because you have to find the right kinds of labor, someone who can take instructions, is just technically proficient, and is willing to accept “better pay” than the alternatives, which in the US meaning less than minimum wage at McDonalds. And the thing of it is, China isn’t stupid, they know they have a demographic time bomb to deal with, so they are getting busy with the automation. And if you’re a company like Apple, the bottom line still matters even if your entire supply chain is locked up in some of the more volatile area in the world, and most of it could be appropriated by the government by fiat.
Yet, somehow, all these delicate supply chains moved from America to a communist country.
Well, what did you expect, While China was busy setting up for the future, Bill was enjoying Monica, and while China was opening up FTZS in one area after another, W was bringing democracy to the Middle East. Both did excellent jobs.
So, why is anyone surprised that China has eaten the US’s lunch and is now planning on dinner. But hey, the J team is being very strong competitor to China, they are going to drown China in stimulus, infrastructure, and build back better and equitably.
?
2banana
what’s communist got to do with it
It is important to keep in mind that all Chinese, and to some extent their dependent allies, business activities are controlled by the central CCP. Business may be business, but the CCP maintains complete political power and control. They also control their Navy’s activities in the South China sea and elsewhere globally. CCP is a political dictatorship that has accumulated vast industrial might under its direct control. Just saying…
Of the 240 $ or so to make i-phone the screen alone is over 100$ from Samsung in SK. Then come the chips from SK and Taiwan. The labor component i.e., assembly, is insignificant.
@MCH
This is right
Did you read recent interview with the TSMC founder – he raised such points about his arm twisted fab building in Arizona
This isn’t really the result of outsourcing to Asia though. At the beginning of the pandemic there were lockdowns and reduced production. Then companies (producers and buyers) thought there would be little demand so not enough was done to order more supply / ramp up production. Now we have a supply/demand gap. We would have had the same problem with US production. Look at lumber, it’s the same problem, and the vast majority of it is produced in the US/Canada.
This may however lead to a rethinking of just in time supply logistics. Companies got rid of their warehouses and often get supply straight from the truck into their manufacturing line, because it saves some costs and what could possibly go wrong?
2B
If you had a truly resilient free capitalist market, there would be a little ‘niche’ player somewhere turning out a traditional non-ecrap vehicle (they did used to go very well without all that crap you know) and right now he would be working to the max and laughing at all the chaos.
He doesn’t exist because the complicit regulators and non-competitive marketers have regulated him out of business so that all the suckers can be fleeced for a mobile office and entertainment studio that is nothing to do with getting from AtoB and costs megabucks. It’s all coming home to roost with the nightmare of catalytic convertors which are being chopped out with angle grinders and stolen for scrap precious metals leaving all cars vulnerable to breakdown and increased insurance costs. The regulators get us all in the end.
Mini, LR, Jag, all in recent news here for short time working.
Who wants to buy a 70’s replica, no chips promise!
I’m seeing less than a 20% drop for the year by there estimates if my math is correct. That’s a blip if demand falls once the free money is gone. What am I not understanding.
Quite a lot. You are not understanding that closed factories are losing money and worse, they ain’t making money. I’m sure the math calculation would have to include these two factors. In fact, it may well be incalculable due to the unknown missed opportunity costs.
If blip was your output, it must be based on the fact that all losses will be made whole again courtesy of the taxpayer. If so, damn good insight! You could be the next Chairman of the Federal Reserve!
Didn’t I read the new infrastructure has $160 billion for automakers through EV subsidy.
Terrible news for my company, a very Ford heavy Tier 1 supplier, and potentially for hundreds of thousands of jobs across the automotive industry. Hoping F is erring cautious with their guidance, but I suspect not. The demand for cars is there, as Wolf notes, so suppliers like us will probably end up raising prices to keep people on staff. More inflation. And then the fleet sales orders will be places to try and lock in a lower price, more inflation. Its either automotive or housing thats going to be the first balloon to burst. I was hoping it’d be a slow contraction over the next year but the Fed has made sure we are going to test the limits of QE. The economy was roaring before the pandemic. We shut down but it seems like most people can go back to work. Still buying a stupid large number of bonds and have the 0% peg. It’s truly psychological warfare with the American people being tricked into spending more than they have.
> The economy was roaring before the pandemic.
Yeah, if you ignore the “balance sheet” normalization in 2018, wackamole in REPO in 2019 and long term declines in LFP…
Here Here! The spring of 2020 couldn’t have turned out any better for certain guilty parties who would have had a lot of splaining to do on why they needed to print more money then all the years since 2008.
Yet there are reports China (CCP) has been hoarding chips and other stuff like rubber and rare earths. No shortages over there. Meanwhile we tie our hands going “green”, all in on EV’s. Way to go Joe.
Rubber?
Commercial rubber hasn’t been made from trees in the south pacific and SE Asia since the 1940s.
“people are saying”
What reports? Do you have legitimate sources?
Because a quick Google pulls up headlines like “China carmakers struggle with chip shortage”.
“China ‘hoarding’ vehicle chips is causing US shortage: Automotive sector analyst”. – FoxBusiness Video
Also been noted on CNBC.
B
Green is replacement for lost religion.
Just a bit of IRL comments on this chip shortage. There are some fabs that are running 100% capacity now, but the projection they are showing through the end of the year is that demand will taper off by end of year to early next year. The feeling is that this problem is being amplified and overblown right now, and everyone is just posturing.
No one is necessarily able to bring up capacity in any meaningful way, and some at least feel that this is everyone going all in on one side of the boat, and it’s a dangerous thing when things tip over, and the demand suddenly evaporates. Which may very well happen since a lot of these requirements are built on the backs on consumers. And the biggest group there will eventually be tapped out. Besides, even if Intel, TSMC and everyone else is adding capacity, it’ll be years before that capacity really shows up.
I wonder if they will reallocate components with chips away from the spare parts network to feed the factories. “ sorry sir that glitch with the ABS brakes on your new Escalade could have been fixed in an hour but the parts are back ordered for 9 months so your new ride is a boat anchor.” I think this is coming soon to a dealership near you.
“Ford cut production 50%”
that smells.
True, you cannot finish the car but you can build most of it. Chips can be replaced and put in later. Some extra cost involved by putting those things in later but definitely not as costly as idling 50% of your production line. Those chips are on a big board that for service purposes can be replaced. And a car, last time I checked, there is a lot of stuff in it that is not computer chip.
So this statement, cut production , can it be manipulation of the market by creating an artificial shortage?
Does this sound implausible or more likely in an era where all players try to take advantage of any situation to raise prices?
After living thru the last 12 years nothing is implausible. Remember when the government was negotiating trade deals that lawmakers were not even allowed to view with a phone or paper and pen? The TPP and so forth, which essentially gave Corporations a higher status on the totem pole then national governments? They could sue the government if they didn’t like laws that were passed. Now in 2020 we have the WEF telling us we will own nothing and everything will be a service that you will pay for forever and enjoy it, you just have give up any semblance of freedom. Back in 2008 when people were freaking out about Socialism and Obama i didn’t think anything of it, just hysterics. 12 years later i’m not so sure, don’t get me wrong its not just democrats. I think the elites in our country are all on board. They don’t believe in anything but remaining in power and are morally and ethically bankrupt.
Show me a billionaire who’s not seriously mentally ill. They have a disease of greed and get off on controlling people. They have more money than they could ever possibly need, so the next thing is power.
I used to believe in free market capitalism. But now I don’t believe it’s possible, because we have a rigged system where the billionaires control everything and refuse to allow any meaningful change while they steal more and more of the fruits of the labor of everybody else. I now believe in taxing them back into double digit millionaire status, or doing away with them altogether. These people are a scourge.
Depth Charge,
At the only job I ever had working for someone other than myself or with my dad, back in the summer of 1984, I worked for a man who is now a billionaire, with just over 25 million shares currently owned of the company he founded – BestBuy.
This man is the American dream come true. His success came from hard work, having good people around him and treating his customers well. He is a generous philanthropist and a good man.
So yeah, I can show you a billionaire who’s not seriously mentally ill.
As far as free market capitalism, Dad and I set up a wheat seed genetics company so that farmers could grow better quality, more disease resistant, and higher yielding wheat. Why, so that the farmers could succeed and make a profit from their work, and so that humans would have food to eat and not be hungry. Oh yeah, and so we could sell seed and make money too.
Yes, the system is rigged at the level of the Fed, Congress and Wall Street, but please don’t equate that with entrepreneurship Depth Charge. You sound vindictive and jealous of those that have succeeded IMO.
“Yes, the system is rigged at the level of the Fed, Congress and Wall Street, but please don’t equate that with entrepreneurship Depth Charge. You sound vindictive and jealous of those that have succeeded IMO.”
You worry about yourself and don’t bother with me, ok smart guy? FYI – I am doing absolutely fine, financially speaking. I own my own business but am smart enough to realize how unfair the system is for the country as a whole, and the downward spiral we’re in. I am one of those rare breeds who is able to look beyond my own successes and what benefits my wallet to what is best for society. You should try it sometime.
Dan just wanted a chance to tell us all that he once worked for a bigwig. Kind of the business equivalent of saying you got to talk to Kim Kardashian once in real person.
Yes. Mike Bloomberg is a great example. I’ve always hated him for his gun-grabbing schemes, but his crusade to ban large soda cups was the straw that broke the camel’s back for me.
These people are sociopaths, and have an insatiable desire to control other people.
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”
– C.S. Lewis
No, I was simply making the point that not all people who are billionaires are “seriously mentally ill.”
I was also trying to make the point that those who succeed in business, and I wish Depth Charge all the success in the world in his/her endeavors, should not be taxed in a punitive manner. Advocating that wealth, as defined by “double digit millionaire status” should be a limit to a person’s wealth strikes me as being vindictive.
“Doing away with them altogether?”
Cutting production makes sense.
Ford doesn’t have a documented process in place to keep track of 1 million vehicles that have been built with missing parts. At some future point, they’d have to track down the vehicles that need the newly available parts, install them, verify that ALL of the missing parts have been installed and then figure out where to ship it. Mistakes will be made, and if those mistakes kill people…
A basic concept for manufacturing quality: You create a process, document the process and then rigidly FOLLOW the process. If you can’t follow the process, you stop the line until either you can begin following the original process again, or you have a new process in place that you can follow.
There’s also the logistics….where does Ford PUT 1 million incomplete and unsaleable vehicles?
Seems like a good time for Ford or Gm to go out in the boneyard and find the tooling and stamping dies for pre-chip vehicles from the “ good old days”. I think they could capitalize on the trend for nostalgia and sell the heck out of Galaxies 500’s , Impallas and Nova’s. Just ask Joe for a waiver of emissions and safety laws and you are good to go. Might be tough finding suppliers for the 8 track sound systems. A “ three on the tree”, and cast iron drum bakes don’t need no stinking chips.
You can still buy a 1970 VW Bug for $15k. Carburetor, plugs coil and distributor. No microprocessors.
Or the 60’s Ford land yacht wagons. Room enough for a 4×8 sheet of plywood.
SC
Thinking not allowed in the motor industry, follow the script.
The catalytic converter ‘shortage’ is reaching towards epidemic levels as the white pm’s are skying in price.
For about $150 (a Harbor Freight Sawzall knockoff & 3 ton rapid pump floor jack) a prospective thief is in business.
All you need is cars, and they’re everywhere.
In my world catalytic converter thieves are running rampant here in the east bay.
And here and everywhere:
“2,000 Catalytic Converters, $300K In Cash Found After Raid In Elk Grove-Three of the suspects, 33-year-old Jose Miguel Lopez Munoz, 44-year-old Nicolas Antonio Murillo and 29-year-old Oscar Humberto Zavala were taken to the department for questioning. Police said they were issued citations for felony grand theft, possession of stolen property and conspiracy.”
Issued citations! In other words, let go with a promise to appear in court. Run for the border and never be seen again? More tolerant law enforcement.
There is no shortage of anything. This is another example of financial engineering to shift the black chips from the two card swindlers (politicians) back into the corporate payola that happens this time of year, year after year.
Nothing to see here but more farce, thieft from consumer, and crockery politics by public servants.
To early to blame the multi- billionaire cause they’re just living by the creed of riches and are allowed to continue.
There is a shortage of bananas also.
I cry b*ll- s**t
People used to drive chip-less cars for quite a long time.ECM became obligatory on new cars only in 1992.
Now,instead of backfiring a car by turning off
the engine while keeping gas pedal pressed down one must spend $40 on Amazon for flamethrowing kit.Total BS. ?
Anyway,some things are so huge that they totally dwarf the field of vision and remain unseen.
I closely follow the state of US steel industry but only recently became aware of the fact that China produces 12(!!!) times more steel than the US
US has 8 blast furnaces (of which 3 are currently idled) China has 260.In poetic terms: blast furnace is a place where steel is born,not recycled.
And the Talk of The Town-recent pronouncements of psychotic J.Powell
Another scowl,another giggle, “Whatever it takes,boyzzz,whatever it takes,stock market to the Moon,yeehaw,whoopee!!!”
When the opportunity arises I’ll travel to Washington DC and throw a pair of sneakers over power lines in front of Fed Eccles Building
Because current Fed policy is f… pointless.Just like pair of sneakers dangling from the power lines.
Brent,
I cover global steel production by country once a year — China, the US, etc. Charts and all. Based on data that is released once a year. The next one will come out in late May/June. This is the last one. Make sure you look at the charts:
https://wolfstreet.com/2020/06/06/crude-steel-production-china-blows-the-doors-off-rest-of-the-world-during-pandemic-after-already-huge-surge-in-2019/
China produces 12 times the amount of steel as the U.S.?
OK, but if China has 40 to 50 times the number of blast furnaces as we do then either a lot of them are shuttered (as 3 of ours are) or they are VERY inefficient producers of steel.
So while bitcoin mining factories are sprouting like weeds and vast amounts of human energy are going into unproductive speculation, we don’t have enough semiconductors.
Can you say “malinvestment”?
Less chips, less problems. About time to face it…
I’m fine with flexing my rest to role down my window.
For want of a nail the shoe was lost . . .
Can I please have some ketchup with my order of chips?
No! There is a shortage of ketchup!
I did not want to go into details in my first comment.Primary steelmaking is actually production of iron from iron ore in a blast furnace.
Secondary steelmaking is processing of iron by 2 methods: BOF & EAF.Here is a short article which will give you a rough idea:
Makes no sense to compare Chinese vs American productivity dividing steel output by the number of blast furnaces.
You cant even compare cheap 1095 structural steel with expensive super-strong maraging steel nuclear reactors are being made from.
Gamma radiation will weaken that as well. What kind of steel do they use to house the toxic nuclear waste with a life of half a million years?
You may google “Dry cask storage”,an in-depth Wiki article will pop up.Regular steel containers,inert gas inside…
Maraging steel has many other uses.They sell it on onlinematals.com,1″ round bar about $400 per foot.
One of these days,flush with stimulus money,I will make myself 7′ Olympic bar from it ?
I have 4 year old Suzuki Wagon R budget van 5 door sedan(1100 cc :(15-18km/litre petrol for local )
only power steering (10 years back I had the same model non power steerring version too)
Non Automatic (manual stick)
No power window . No GPS. only car radio . Not even a/c as I live in a metro 700 metres above sea level. (2-3 months hot but can manage) $6000 brand new (₹450,000).. 1st year compreshensive insurance around $250. after that I renew only 3rd party liabilty insurance (which is a must by law $ 35 per year ).
Day to day alone commuting by Yamaha 110 cc automatic scooter $1000 new on the road. 45km/litre. There is no serious winter here (10-15 Degree is the coldest
PSA ( = Stellantis ) did issue a bulletin where they informed that they are moving over to use traditional instruments in one model ( Peugeot 308 ), thus ensuring that digital instrumentation components are available for other models in their product line.
“Military spending doesn’t cause deficits – Social Security and Medicare does.”
All the G programs do…and a large percentage of them are run like absolute sh*t.
But DC has no incentive and therefore no interest in restraining the wealth it routes through its hands, handing it power and control.
But at every step of the multi-decade clusterf*ck, DC knew it could use dollar printing fraud to evade the consequences of its profitable, habitual failure.
Their failure, our inflation.
CFO John Lawler said during the earnings call that Ford had 44 days of supply of vehicles on dealer lots at the end of Q1.
I’d like to know how he came up with this number because it isn’t true here in the South. They may have/had 44 days of Ecosport and Explorer inventory because they can’t give those away.
If they are cutting production, will they soon be cutting employees?
Will be put on layoff status. with union benefits and UI, they will make about what they make working.
To me, this looks like a classic setup for a boom-bust. There are now shortages because of artificial demand. Capacity is then being added, but it takes a long time till it gets online. By that time the artificial boom has ended so you will end up with massive oversupply.
Why do I have the feeling more Ford 150s will soon be coming in on container ships than having U.S. factories opening back up?
Who is going to make them?
Semiconductor front ends/fabs aren’t simple buildings to construct. A rip in the roof of the fab doing the proprietary chip for BRK/First Alert smoke detectors in Allentown PA in 1981 caused contamination and a whole generation of faulty warning devices to nuisance-trip, older people may remember the stupid things going off in the middle of the night for no reason and scaring the heck out of you. Air handlers, lighting, all has to be specified and built to order, nothing is off the shelf. And all those capital goods manufacturers have their own lead times and supply problems. The ability to fabricate chip level components with minimum spacing (somewhere around 8nanometers)between the discrete devices is limited to a few of the top fabs, like TMSC, from the reading. This spacing requires even cleaner air than anything anybody else was doing ten years ago, let alone 1981. Then testing, burn in, just for commercial-spec. Anybody needs to meet a tougher specifications requirement and it’s a lot more time/money. Just in time inventory management saved a lot of money and kept some companies afloat in previous tough periods, but it assumes economic linearity to be reliable and serviceable. Life turned out to not be very linear, who could have guessed? And don’t car companies employ cost accountants to keep an eye on future material streams? I bought romex cable earlier this year, it’s up 60+% now, but still available, if you need a couple of thousand feet.
If you need a hundred rolls, you’ll wait. Plan ahead or be left behind. New houses are scarce, so used has become more valuable, same with cars. Hopefully they won’t become the latest fad in store-of-value “vehicles”, they’re worse than houses in a flood plain. Maybe lowered production will drop demand for catalyst metals, and the scrappers will stop buying stolen cats from scumbag thieves. They should have to work harder for their ill-gotten gains. The scrapyards, that is. And when the chips show up? Out of the manufacturing sequence? Hope you can just plug them in and go driving.
Price increases are occurring in existing stock that might be scarce soon.
No more ‘standard’ discounts for marine electronic products we install.
We used to give 15-20%, but not now; and not until we are sure things are coming. Also no more selling retail without installing for now. We need the components to keep ourselves busy.
The chip shortage is BS (like the arab oil embargo perhaps). Powell has told corporate America that the punchbowl leaves when the labor market tightens, so it is up to them to see that doesn’t happen. A lot of talk about repatriatiing vital (medical product) manufacture, but nothing about chips. So expect a hiring slowdown, (reasons taken on the fly) as long as government keeps the people in beans. A little inflation is good, a lot of inflation not so much, and goosing the economy real hard at this stage would be counterproductive. Policy is out of the Fed’s hands. They can’t set interest rates, all they can do is monetize, and if yields rise let the offshore buyers join the feast. Sure the Feds balance sheet might blow up, but they can off balance sheet their losses, (probably). If you hate the Fed you are going to love the next couple years.
I gotta think some mid-level procurement manager in one of the auto companies raised his/her hand, meekly, and said: “Hey, with everybody else cutting chip orders maybe we should grab a bunch, possibly at a discount? They don’t go bad or need to be refrigerated.” I believe Toyota did just that (or at least kept existing orders). Of course, said mid-manager would have been laughed out of the conference room.
This may be the greatest example of group-think ever–bigger than McNamera and his ‘Whiz Kids’ maintaining ‘Just a few more bombs’ would pound the North Vietnamese into submission. It appears the auto companies just ass-you-me’d that no one would be driving in a pandemic, preferring to stick with public transit, taxis and ride-sharing.
I just took my old dinosaur in for a transmission service this am. No chips or anything else needed here. My biggest worry was the technician crashing it on the test drive following the service, as the thought of having to be in the market for a replacement truck right now sends shivers up and down my spine.
Here’s a stat on semiconductors:
If this is accurate, it’s rather interesting that, apparently, China earned “the largest share of semiconductor sales in 2020: $151 Billion” US $s.
It begs the question, since the US Elites outsourced decades ago, millions of well paid jobs; since then, the US, relatively speaking, makes very few products. What happens when China, Eurasia economies far outdistance America’s Financial World???
Semiconductor sales worldwide 2015-2020, by region
Published by Thomas Alsop, Apr 23, 2021
In 2020, China made up the largest share of semiconductor sales with 151 billion U.S. dollars, with the rest of the Asia Pacific region recording 118.2 billion U.S. dollars in semiconductor sales. Semiconductor sales in the Americas amounted to 94.1 billion U.S. dollars.
So why are CEO’s being paid 300 times the average worker’s salary? what happened to the M in MBA’s. This is another example of incompetent CEO”s who cant’ manage their way of out of the paper bag. What good is to have a MBA from Harvard? or Stanford? or any where else. if you can not manage supply chains. Another instance of American failure. This is not a supply issue. It is miss-management issue.