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Ford's European Production Halt to Have a Large Impact

By Daniel Miller - Feb 26, 2021 at 3:10PM

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How concerned should investors be about the five-week production shutdown in Saarlouis, Germany?

If you've been keeping an eye on the global automotive industry, you're no stranger to the ripple effects caused by a shortage in semiconductors. The need for these chips has boomed in recent years, coinciding with an explosion in automotive technology, driveline components, and interior infotainment systems. The chip shortage is about to hit Ford Motor Company's (F 3.89%) European operations in a big way.

More specifically, the chip shortage will force Ford's factory in Saarlouis, Germany to halt production for five weeks. That factory builds Ford's Focus compact car, which is a serious part of the company's business operations in Europe. In fact, through the first three quarters of 2020 the Focus was the automaker's top-selling vehicle in Europe and accounted for 18% of its total Euro 20 sales.

Ford's 2019 Focus on a European street.

Ford's 2019 Focus in Europe. Image source: Ford Motor Company.

The bad news isn't limited to Ford's Saarlouis, Germany plant, either. The chip shortage caused minor disruption to Ford's Cologne, Germany plant, which produces another highly important vehicle, the Fiesta. Ford's Kuga (Escape) crossover, Mondeo (Fusion), and Galaxy minivan also felt some production impacts. Overall, the chip shortage will cause downtime and lost production; Stuart Rowley, Ford's regional boss, told Automotive News Europe "That is a huge impact on our operations,".

Analysts expect the global production shortfall across the automotive industry during the first half of the year could reach 1 million units. On the bright side, while this will certainly negatively impact many automakers' results during the first quarter, the issue should subside before or early in the second quarter. Most of the lost production should be recovered during the second half of the year.

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