Ford's pain underscores uneven impact of two-year auto chip shortage

By Ben Klayman and Stephen Nellis

DETROIT/SAN FRANCISCO (Reuters) - Ford Motor Co's disappointing quarterly results underscored that disruptions caused by the global semiconductor shortage are still bedeviling automakers, but some are suffering more than others.

Ford said on Thursday it left billions of dollars on the table that were within its control and blamed a 100,000 vehicle shortfall in its fourth-quarter volume mostly on the inability to obtain enough chips.

"We're going to see in 2023, there is still going to be volatility around chips," Ford Chief Financial Officer John Lawler said on Thursday. "I know there's been a lot of discussion about 'Well, the chip supply issue is over,' but on the larger, older nodes that are primarily the chips we use in the auto industry there is still capacity constraints."

"We're working to get access to as much as we can through the spot market and the broker market," he added. "It's hand-to- hand combat."

Ford and other automakers dialed back production after the COVID-19 pandemic hit in 2021 and chipmakers responded by shifting shipments to the consumer electronics industry. The auto industry has been playing catch-up ever since, although some companies have talked about a slow improvement in supplies as the shortage enters its third year.

By the end of 2023, almost 18 million vehicles will have been removed from production plans since the chip shortage started, according to Auto Forecast Solutions.

"It's easing," Sam Fiorani, the firm's vice president of global vehicle forecasting, said of the shortage. "There are more chips out there and if you have proper access to them, your production will be fine."

General Motors Co Chief Executive Mary Barra last October said short-term disruptions would continue to occur but overall semiconductor supplies were improving due to deals with chipmakers, and a spokesman for the Detroit automaker said on Friday that had not changed.

German automaker Volkswagen AG said on Jan. 10 it expected 2023 production to remain challenging because of ongoing chip shortages, but forecast a step-by-step improvement of supply over the course of the year.

Tesla Inc, which has been recognized for handling the chip shortage better than most automakers, said last October it was able to address some chip issues by rewriting its software to use different or fewer chips. The EV leader said then that it buys about 1,600 different chips from 43 suppliers.


Ford is not alone in feeling the pain.

Japan's Denso Corp, a leading supplier to Toyota Motor Corp, on Friday slashed its annual profit forecast and warned the chip shortage could cause auto production cuts. Toyota in November cut its vehicle production projection for the current financial year through March due to the chip shortage.

The head of another auto supplier, Aptiv Plc, which makes advanced driver assistance systems, vehicle computers and high-voltage cabling, said the impact of the chip shortage is not evenly felt.

"When you look at the semiconductor challenges ... it's really much more focused, rather than a general supply constraint, (it's) specific suppliers who are causing constraints," Aptiv CEO Kevin Clark said on Thursday. "We expect that to continue into 2023."

Kurt Sievers, CEO of Dutch automotive chip giant NXP Semiconductors, said this week there were three kinds of automotive chips whose supplies will stay tight through 2023. NXP still sees shortages of 180-nanometer high voltage micro-controllers used in electric vehicles, some variants of 90-nanometer chips and 55-nanometer chips with embedded high-reliability memory.

"Those are still tight, which means we are still hindering car companies from building the cars they want to build," Sievers told Reuters. "But this whole thing about millions of cars cannot be built, that will be behind us, at least as it concerns NXP, by the end of this year."

Asked why Ford seemed to be hit more than other automakers, a company spokesman said the issues did not hit all companies to the same degree at the same time, and acknowledged others moved faster after COVID-19 hit to secure chips.

Ford executives said on Thursday they had opportunities to further cut supply-chain costs. Lawler said higher shipping costs on chips and the manufacturing disruptions Ford caused its suppliers were part of $1 billion in premiums paid by the Dearborn, Michigan-based automaker last year.

"While these issues are by no means restricted to Ford, it does appear to have been disproportionately impacted in 4Q," J.P. Morgan analyst Ryan Brinkman said in a research note. "We expect these issues to continue into 2023, but abate as the year progresses."

(Reporting by Ben Klayman in Detroit and Stephen Nellis in San Francisco; Additional reporting by Joseph White in Detroit, Jane Lanhee Lee and Hyun Joo Jin in San Francisco, Victoria Waldersee in Berlin and Daniel Leussink in Tokyo; Editing by Matthew Lewis)