Major U.S. automakers are shutting down production lines. A large fire at a major aluminum supplier's plant and geopolitical tensions have also disrupted semiconductor supply chains.
According to the Wall Street Journal (WSJ) on Oct. 19, the Stellantis plant in Michigan that produces Jeep's key SUVs halted operations last week due to an aluminum shortage and plans to stop production until early next month. Jeep is Stellantis' SUV brand, and the Michigan plant produces the Jeep Wagoneer and Grand Wagoneer.
Ford also halted production of the small SUV models Expedition and Lincoln Navigator at its Kentucky plant for the same reason. Ford plans to suspend assembly of the two models at the plant through Oct. 26. Citing plant workers, the WSJ said production of high-end models priced at more than $100,000 (about 140 million won) and F-Series Super Duty trucks has also begun to be reduced.
The primary reason U.S. auto plants have come to a standstill is a fire at a plant of Novelis, a major aluminum supplier. Novelis is a key supplier of automotive aluminum sheet used in major vehicles including Ford's F-150 pickup truck, and a fire broke out last month at its Oswego, New York, plant. The plant is known to supply about 40% of the aluminum sheet for the entire U.S. auto industry.
A Ford Spokesperson said the company is working closely with Novelis and is "exploring every possible alternative to minimize potential disruptions."
On top of that, the suspension of exports by Nexperia, a Netherlands-based semiconductor company, as an extension of U.S.-China tensions is further burdening U.S. automakers. Earlier, the Dutch government implemented emergency measures to take control of Nexperia's management, saying there was a possibility Nexperia would transfer core technology to its parent company, China's Wingtech. As a result, semiconductor exports were also banned. At the time, some foreign media reported that pressure from the Donald Trump administration was behind the Dutch government's move.
The Alliance for Automotive Innovation (AAI), which includes General Motors (GM), Toyota, Ford, Volkswagen, and Hyundai Motor, urged swift resolution, saying the suspension of semiconductor exports could cause serious disruptions to auto production. John Bozzella, head of AAI, said, "If shipments of automotive chips do not resume quickly, auto production in the United States and several other countries will be halted, and other industries will also feel the impact."
After the sharp drop in semiconductor supply during the 2020 COVID-19 pandemic dealt a major blow, automakers pursued supply chain diversification. However, in this situation, that had no effect, the WSJ said. At the time, only the supply of a single item—semiconductors—was disrupted, but now the supply of multiple items needed for auto manufacturing has been halted simultaneously.
Sam Fiorani, an analyst at consulting firm AutoForecast Solutions, said, "The lesson from the semiconductor crisis is that manufacturers should have prepared for some problems in the supply chain," adding, "But no one expected everything to hit at once, and it is very hard to respond. Problems occurring simultaneously is something that may happen once in a lifetime."
Moreover, China, which is in a trade dispute with the United States, has moved to control rare earths essential for auto production. China accounts for about 90% of global refined rare earth production. As rare earth exports have been restricted, automakers had to find workarounds to keep production going, and some even considered the extreme step of sending motors made in the United States to China to have magnets installed and then bringing them back, the WSJ reported.
With multiple headwinds hitting at once, the auto industry's outlook for next year is not bright. According to S&P Global Mobility, U.S. auto sales this year are expected to end slightly above the 15.9 million sold in 2024. With tariff burdens and other factors keeping the average vehicle price around $50,000 (about 70 million won), the industry does not expect sales to increase noticeably next year.