Volkswagen expects global chip shortage to further hit output with no chance to recoup existing losses – reports

The world’s second-biggest automaker, Volkswagen, said another production hit in the second quarter of 2021 is impending due to the global chip shortage. The projected losses will outpace the damage forecast in January–March.

“We are being told from the suppliers and within the Volkswagen Group that we need to face considerable challenges in the second quarter, probably more challenging than the first quarter,” Wayne Griffiths, president of the company’s Seat brand, told the Financial Times.

Last year, Volkswagen said it had projected manufacturing output would drop by 100,000 vehicles in the first quarter of 2021 due to semiconductor shortages. The company now says it does not currently have enough production capacities to recoup that lost output later in the year.

According to Griffiths, the shortage is the “biggest challenge” the auto manufacturer currently faces. He described production at Seat’s Martorell plant, outside Barcelona, as “hand to mouth.” It is reportedly being forced to decide which cars to build only after chips from suppliers are delivered.

“The name of the game this year will be flexibility. We have to try to build when chips are available,” he said.

Volkswagen has halted works entirely at several plants across the group, while output in its Slovakia plant, which builds many of its largest sports utility vehicles, has been partially stopped.

The enormous pressure from the crisis is taking a terrible toll on producers across the automotive industry. Supply shortages are projected to impact production until the second half of the year.

Last week, Ford shut a dozen facilities in North America and Europe, while Renault suspended production completely, citing uncertainty in the supply chain. Daimler cut the hours of more than 18,000 workers in Germany to lower production levels, while Jaguar Land Rover is reportedly planning to close two of its UK plants in the near future.

China’s soaring imports of semiconductors, along with the rise in the demand from electronics industries amid greater technology use during the pandemic, have resulted in a perfect storm in the global chip-making sector, causing a huge negative impact on supply chains. The crisis was further exacerbated by severe winter storms in Texas in February, a major US semiconductor producer, and a blaze at a Renesas chip factory in Japan last month.

Governments across the globe are pushing for the construction of semiconductor plants, with manufacturers banking on a recovery after the pandemic, involuntarily adding fuel to the fire.

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