Pass The Chips. Wait, They Are Running Out Of Semiconductor Chips, And It’s Costing The Auto Industry $60 Billion!

FILE - In this Sunday, Oct. 11, 2020 file photo, A row of 2020 Ford Escape sports-utility vehicles sits at a Ford dealership in Denver. A widening global shortage of semiconductors for auto parts is forcing major auto companies to halt or slow vehicle production just as they were recovering from pandemic-related factory shutdowns. Ford had scheduled down time next week at its Louisville, Kentucky, assembly plant, but moved it ahead to this week. The plant makes the Ford Escape and Lincoln Corsair small SUVs. (AP Photo/David Zalubowski, File)

As if the world’s automakers didn’t have enough of a challenge in the wake of the COVID-19 global pandemic, they now face a major challenge in the form of a chip shortage.

The numbers are staggering, and it’s all due to the dramatic cutback in the production of semiconductor chips.

Consulting firm AlixPartners, in a CNBC story, said it expects the situation will cause more than $60 billion in revenue loss in 2021.

Dan Hearsch, a managing director in the New York-based firm’s automotive and industrial practice, had a serious warning.

“All the way up and down the supply chain, everybody is out some portion of money,” he said to CNBC. “This could be 10% of global demand this year, its impact, which craters the recovery. We don’t think we’re overstating this.” 

The shortage has put the brakes on auto production and has cost workers their jobs.

Semiconductors are vital in the operations of today’s computer-controlled systems in cars.

When the pandemic caused automakers to slow or cease production, chip demand also stalled. But as the slow recovery has continued, the new increased demand isn’t being met.

General Motors expects losses from $1.5 billion to $2 billion this year. Honda Motor and Nissan Motor, according to the CNBC report, expect to sell 250,000 fewer cars through the end of Q1. 

Ford has cut way back on its top product, the F-150 pickup trucks, because of the chips’ limited supply.

“Right now, estimates from [chip] suppliers could suggest losing 10% to 20% of our planned first-quarter production,” Ford CFO John Lawler said in an Axios story earlier this month, adding the losses could reach 2.5 billion for 2021.

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