A computer chip shortage has shut down the Louisville, Kentucky, Ford plant this week, the latest shutdown because of an industry-wide problem that is expected to spread to many other auto plants in the coming months.
The Louisville plant employs 3,800 hourly workers, who will receive about 75% of their normal pay during the one-week shutdown. It assembles the Ford Escape and the Lincoln version of that SUV, the Corsair.
“The global semiconductor shortage is presenting challenges and production disruptions – for the global auto industry, including Ford (F) (F), which could have a significant knock-on effect on jobs and the economy given the importance of auto manufacturing,” said Ford (F) (F) in a statement.
Automakers cut back orders for computer chips early last year when the pandemic slammed the brakes on auto sales and production because of temporary plant closings.
When car sales bounced back sooner than expected, it left the industry struggling with a chip shortage. That was exacerbated by increased demand for laptops during the stay-at-home era – and the electronic and computer industries snapping up the excess supply of chips, said Kristin Dziczek, vice president of research at the Center for Automotive Research, a Michigan think tank.
“It’s temporary but it’s not going to be short-term,” she said. The problems are likely to last throughout the first three months or so of the year. Supplies should hopefully be back to normal in the second quarter.
The average car has between 50 to 150 chips in it, she said. And all the chips are needed to proceed with assembly of the cars.
The problem is not just affecting US auto plants – plants in Europe and Asia are also dealing with chip shortages.
Correction: An earlier version of this story incorrectly stated that Ford's shutdown was the industry's first because of a chip shortage. The Ford shutdown is just the latest auto plant idled by a chip shortage.