Severe weather, port blockages and microchip shortages are wreaking havoc on U.S. auto production with Honda and Toyota now facing disruptions.
Honda says all of its auto plants in the U.S. and Canada are being affected in some way. Production at most plants will be halted next week, though the situation remains fluid.
It is unclear how long the disruption will last, but both Honda and Toyota said they do not expect to furlough any employees.
“We continue to manage a number of supply chain issues related to the impact from COVID-19, congestion at various ports, the microchip shortage and severe winter weather over the past several weeks,” Honda said in a statement.
Honda of America Mfg., Inc. has four plants in Ohio: the Marysville Auto Plant, East Liberty Auto Plant, the Anna Engine Plant and the Honda Performance Manufacturing Center in Marysville.
Honda and Toyota said Wednesday they are halting production at the North American plants because of limits in needed supplies, including petrochemicals used in plastic and electronic components and semiconductors. They join other automakers like General Motors Co. that also have had to shut down plants this month because of the global shortage of microchips used for driver-assist features to heated seats as well as in consumer electronics.
The challenges, especially with semiconductors, highlight the need for strategic alignments for certain parts that require large amounts of scale and investment. That includes batteries needed for forthcoming electric vehicles.
“The scale of production is huge, the investment is huge, and the alignment is strategic,” Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, said of both semiconductors and vehicle batteries. “Disruptions that happen there are going to be difficult to deal with. They do not flow as smoothly as other parts in the industry. It’s sticky and chunky.”
Honda has created an alliance to use GM’s Ultium battery technology it will manufacture with LG Chem. A $2.3 billion battery plant in northeast Ohio will have 30-gigawatt hours of capacity. Depending on the size of the vehicle, that may translate to 300,000 to 400,000 units.
“Batteries are specialized, not interchangeable and there’s these strategic tie-ups and supplier relationships, while there aren’t very many independent battery plants,” Dzcizek said. “You have these big blocks coming online. That makes it stickier between companies. The case is the same with semiconductors.”
Pandemic-induced restrictions at West Coast ports have become overwhelmed following the implementation of COVID-19 restrictions. Vancouver, Washington, had a record-breaking 2020 with revenues totaling $50 million, a 15% increase over 2019. February imports rose 26% year-over-year in Oakland, California, and 53% in Los Angeles.
“One year ago, global trade slowed to a crawl as the Covid-19 pandemic first hit China and then spread worldwide,” Gene Seroka, port of Los Angeles executive director, said this week in a statement. “Today, we are in the seventh month of an unparalleled import surge, driven by unprecedented demands by American consumers.”
Semiconductor manufacturers, meanwhile, last year had pivoted from producing microchips for automakers, who shut down North American production for weeks, to consumer electronics that experienced increasing demand as more people worked from home and students went to school online.
“It takes three to six months to reallocate,” Dziczek said. “It’s going to take several months to get that capacity needed after the automakers came back and consumer demand was strong.”
Because of semiconductor shortages, production also halted this week at GM’s Lansing Grand River making the Chevrolet Camaro and Cadillac CT4 and CT5. It will be down through the rest of March along with the San Luis Potosi plant in Mexico where the Chevrolet Equinox and Trax and GMC Terrain SUVs are built. Other plants facing extended downtown are in Kansas where the Cadillac XT4 SUV and Chevrolet Malibu are made and in Ontario where the Equinox is built. A plant in Brazil also is facing downtown in April and May. Last month, GM said the shortage could hurt 2021 earnings by $1.5 to $2 billion.