Ford Reveals How It Plans To Tackle The Chip Shortage

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The global chip shortage is hitting the Blue Oval hard.

Ford has been struck by the global semiconductor chip shortage. Last month, it reported a $3.1 billion loss, primarily due to the drought and its inability to produce cars. A day before that shock announcement, Mustang production ground to a halt for a second time.

Speaking at a recent Ford shareholders meeting, CEO Jim Farley spoke about the company's supply issues and how it plans to combat the problem, which includes making additional deals with chipmakers to increase the flow. As you can imagine, Ford's shareholders were keen to hear him out, considering the whopping loss reported a month earlier.

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"The other thing we must do is secure contracts with our supplier or suppliers, where possible, in commodities we know will be constrained like semiconductors," Farley said. "In the case of semiconductors, that will require both mature node semiconductors or feature-rich semiconductors like window regulators, as well as the advanced nodes that run our connectivity electronic components, as well as infotainment. These will be very important, and you've seen announcements like GlobalFoundries, there'll be more of those, and we'll have to do it on the raw material and the battery side as well."

Ford allied with GlobalFoundries last year, and the US chipmaker has promised to double its output in 2022. GlobalFoundries will invest an additional $6 billion to expand its production capacity but freely admitted that the shortage will still last well into 2022 and beyond.

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Ford in Europe also joined two new supply chain partnerships and is investigating vertical integration. The latter is a fancy way of saying that Ford is exploring the possibility of purchasing smaller companies that secure raw earth materials, which is another shortage it's currently facing.

The short-term solution is to keep on removing non-critical features from vehicles. According to Farley, this will remain the norm for quite some time as he thinks the chip shortage will last through 2023.

The most recent example is the 2022 Ford Bronco, which has already sold out. A source close to Ford revealed that Broncos manufactured from the start of May would leave the factory without a navigation system. This was the first time Ford chose to omit a feature that could not be retrofitted after the fact, which goes to show how bad the problem currently is.

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2021-2022 Ford Bronco Front Angle View
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