The car industry needs to improve its forecasting to avoid another chip shortage, according to a senior executive at Continental, one of the world’s largest car parts makers.
Wolfgang Schäfer, chief financial officer of the German components group, said the current supply crisis, which has crippled the industry, was partly caused by unreliable estimates from carmakers themselves.
Groups from Volkswagen to General Motors have been forced to cut production because of a global chip shortage that is not expected to recede until the second half of the year.
GM said last week that it will idle its plant in Lansing, Michigan, until at least the end of the month because of the shortage, adding to sites that are offline or have planned downtime in Kansas, Canada, Mexico and Brazil.
Schäfer told the Financial Times: “Part of the problem was the auto industry was not reliable in forecasting over the last three years . . . They always ask a lot and then always order less.”
In a separate interview, Hidetoshi Shibata, chief executive of Japanese chipmaker Renesas Electronics, said that as of last spring the company had been asking automotive clients for detailed updates to forecasts, reminding them of the long lead times for production.
The crisis started last year. As the pandemic swept the globe and businesses closed to stop the spread of the virus, carmakers cut production and chip orders.
Markets such as China and the US recovered faster than expected, but when carmakers tried to increase output again in response, they found chips in short supply because of an explosion in demand for consumer gadgets, computers and phones during the pandemic.
When carmakers initially sharply cut their orders in April and May, Renesas asked every client to provide the company with longer-term forecasts, Shibata told the FT.
In some cases, it signed contracts where clients guaranteed to buy 80 per cent of the ordered amount, regardless of changes in car demand. “We were holding longer-term discussions and that paid off,” Shibata said, adding that he still has regular calls with clients to track supply needs.
So far, Renesas, one of the world’s largest producers of automotive chips, has been able to keep supplying its clients without any major disruption but the situation is tighter than ever.
Shibata said some of the shortage has been caused by panicked carmakers putting in “excessive orders” towards the end of the year to increase inventory levels.
The crisis has forced carmakers to prioritise production of their highest margin vehicles during the period.
GM said last week it “continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs”.
Source: Economy - ft.com
