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Ford to Halt Production at U.S. Plants Over Chip Shortage

Ford Motor Company (NYSE:F) announced the closure of several plants in the U.S. for a few weeks in July and August, due to the global semiconductor sh...

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This story originally appeared on ValueWalk

Ford Motor Company (NYSE:F) announced the closure of several plants in the U.S. for a few weeks in July and August, due to the global semiconductor shortage. The supply crisis would cost the company $ 2.5 billion this year and would slash its assembly capacity by half in the second quarter.

Image source: YouTube Video Screenshot via Valuewalk

 

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The temporary shutdown is also seen by experts as a sign of a slow recovery within the automotive industry.

Ford To Close A Total Of 8 Plants

Ford announced that its Chicago assembly plant, where Explorer SUV models are made, will be closed from the week of July 5 through to July 26. On August 2, the plant will return to operations in two shifts.

A two-week shutdown at its Kansas City plant will also take place in August, where the company assembles one of its most representative and best-selling models, the F-150 pickup truck.

The plant in Michigan, where Ford recently started production of its Bronco SUVs, will stop for two weeks this month, with the company stating that the halt is mostly due to the scarcity of some auto parts, and it is not related to the semiconductor shortage.

“As we continue to build new vehicles, we are prioritizing completing our customers' vehicles that were assembled without certain parts due to industry-wide semiconductor shortages,” the company said in a statement.

Upon the announcement, Ford shares dropped nearly 1% in late afternoon trading on Wednesday.

Bearing The Brunt Of Chip Shortage

According to a report by AlixPartners, the semiconductor shortage will cost the global automotive industry a whopping $110 billion in 2021 revenue. As informed by CNBC, the initial forecast from late January ranked at $60.6 billion, which represents an increase of 81.5%.

Ford CFO John Lawler told Forbes that the automaker closed the last quarter with only 44 days of vehicle supply, way below the healthy industry norm of 60 days.

The decline in COVID-19 cases and its subsequent effect on vehicle demand has been the driver behind the growth of the automotive stocks seen so far in 2021. March and April record sales have also been a key contributing factor.

However, the semiconductor supply crisis has prompted even the industry greats to close factories, halt production, and cut down on jobs. Still, Ford is aiming at investing more than $30 billion on electric cars by 2025, which will likely represent around 40% of the company’s global sales by 2030.

Ford is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders' families.