Parts shortage prevents Ford from selling tens of thousands of cars

Parts shortage

The ongoing global supply chain problems are continuing to severely impact the automotive industry. Ford recently announced that between 40,000 and 45,000 large pickups and SUVs are currently stuck in its factories, waiting for parts. The carmaker expects to incur additional costs of US$1 billion this quarter due to these shortages combined with rising prices for parts.

Carmakers are struggling with various supply chain problems, but the shortage of computer chips is particularly disastrous. Such chips control virtually every on-board system, so an average vehicle contains hundreds of them.

Chip shortages have forced Ford to temporarily close some of its factories at times. And back in March, the company decided to sell some of its SUVs without certain chips – albeit less crucial ones – with a promise to retrofit them as soon as possible after delivery.

Supply problems are easing

There are signs that Ford and other car manufacturers anticipate the supply problems improving in the near future. In July, John Lawler, CFO of Ford, told investors that the company expects to see an “increase in volumes through the second half of the year as some of the chip constraints ease”.

The automotive industry is not the only one facing supply chain problems and shortages. In a National Association of Manufacturers survey released last month, 78% of members indicated that supply chain disruptions are their primary business challenge, and only 11% now expect things to improve by the end of the year.

Higher raw material costs

The survey additionally revealed that 76% of members regard higher raw material costs as a problem, while 40% say that inflationary pressures are worse now than they were six months ago. On top of this, 76% say they are having trouble finding new employees.