(Toronto) Canadian auto parts suppliers warn that the shortage of computer microprocessors that has wreaked havoc on the industry and caused shortages at dealerships has been more severe than expected and should continue to give the lie to predictions.
Posted on August 13, 2021 at 2:46 p.m.
Ian Bickis The Canadian Press
When reporting their financial results this week, some suppliers have downgraded or completely eliminated some predictions due to the unpredictability of the situation.
“The amortization effect on production is more pronounced than some expected just a few weeks ago,” Frank D’Eramo, boss of Martinrea International, said on a conference call.
The parts supplier has decided not to offer any predictions for the third quarter due to the unclear production schedules. Suppliers sometimes receive only a few days’ notice of their customer’s closure.
The situation is expected to continue until the fourth quarter and possibly into next year, Mr. D’Eramo said.
Magna International now predicts the construction of 1.6 million fewer vehicles, compared to its predictions in May, due to the larger-than-expected impact of the shortage of microprocessors.
“It is evident that the shortage of microprocessors has had and will have a greater impact in 2021 than many in the industry anticipated earlier this year,” said Magna boss Swamy Kotagiri.
The shortage of microprocessors, like several other supply issues, is mainly due to the production disruption caused last year by sanitation measures, and production is now not picking up as quickly as demand.
Microprocessors are in great demand for consumer electronics, as more people work from home, and the auto industry struggles to find supplies.
Microprocessors are required by more and more electronic components of vehicles. The shortage has forced automakers to cut production and focus on the most profitable trucks and SUVs; to build vehicles to which components will be added later; and sometimes even to completely renounce certain components.
GM has reduced the availability of features like wireless phone charging, smart mirrors, HD radio, and some fuel-saving features. The giant is struggling to meet demand, and its dealers are practically dry.
Customers aren’t complaining too much right now, said Don Murray, general manager of Murray Chevrolet in Winnipeg.
“There’s a lot of this stuff they don’t even care about. I mean, a heated steering wheel in Manitoba is important, so that’s a shame, but for the most part customers are okay with what’s been taken out, ”he said.
Demand is so high, he said, that customers agree to wait six weeks for their vehicle to be delivered. The dealership had 29 vehicles available at the start of July, but eventually sold and delivered 78 during the month.
“The inventory is so tight that almost everything sells,” said Murray.
The shortage of microprocessors is not about to end. Ford boss Jim Farley predicted on a conference call that the situation will last until next year.
Ford is hit particularly hard, due to a fire at one of its main suppliers of microprocessors. GM spoke of new issues that are surfacing, such as coronavirus outbreaks in Malaysia that could lead to facility closures.
GM announced in early August the end of production of certain trucks. The Ingersoll Ontario plant, which produces the Chevy Equinox, has essentially been closed since February.
The production cuts are worse than expected, Linamar boss Linda Hasenfratz said on a conference call.
At the start of the second quarter, she said, 160,000 fewer vehicles were expected to be produced globally, but instead 2.6 million vehicles were lost.
It is expected to lose 1.7 million units in the third quarter, but she believes the actual numbers may be more like the second quarter.
Companies in this story: (TSX: MG; TSX: LNR, TSX: MRE)