Canadian Manufacturing

Auto parts producers warn of more supply issues to come in semiconductor shortage

Magna International Inc. said it now expects 1.6 million fewer vehicles built this year than what it had predicted only in May.

August 16, 2021  The Canadian Press

Canadian auto parts suppliers say the chip shortage that has created havoc in the industry and shortages at dealerships has been worse than expected and could continue to prove forecasts wrong.

During quarterly earnings reports last week, suppliers revised down or eliminated production and revenue forecasts because the situation is so unpredictable.

“This is having a more dampening effect on production than many expected just a few months ago,” said Pat D’Eramo, chief executive of Martinrea International Inc., on an earnings call.

The parts producer decided not to release any third-quarter guidance because production schedules are so unclear. Suppliers are sometimes only getting a few days’ notice that their customer is shutting down, he said.

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“Visibility is a week out in a lot of cases…a lot of products are hit and miss, run two weeks, stop a week, run four weeks, stop a week. And I think it’s going to be like that into the fourth quarter and maybe even a little bit, almost likely for sure into next year.”

Magna International Inc. said it now expects 1.6 million fewer vehicles built this year than what it had predicted only in May as the chip shortage has more impact than it expected.

“It is clear that the global semiconductor chip shortage has been and will be more impactful to 2021 than most in the industry anticipated earlier this year,” said company chief executive Seetarama (Swamy) Kotagiri.

The semiconductor chip shortage, like so many supply chain issues, came about largely because of the widespread shutdown in production last year because of COVID-19 that hasn’t ramped back up as fast as demand. Chips have been especially in high demand in consumer electronics as more people work from home, leaving the auto sector scrambling to get enough supply.

The shortage of chips that are necessary for the ever-increasing number of electronic components in vehicles has forced major automakers to cut back production, as well as focus supplies on larger, more profitable trucks and SUVs, building vehicles to later add missing parts, and in some cases cutting out some components entirely.

GM has cut back on features like wireless cellphone charging, smart mirrors, HD radio and some fuel-saving features in trucks as it tries to meet the strong customer demand at dealerships where lots are running near-empty.