Ford Motor Company faces possible parts shortages from suppliers in Mexico as the coronavirus suppresses production and threatens the US manufacturing facilities’ ability to continue production.
The Governor of the state of Chihuahua, Mexico, which is an integral region in U.S. automotive industry supplies, has prevented employers from operating at more than 50% capacity to attempt to control the spread of COVID-19.
“Due to COVID-19, the state of Chihuahua in Mexico has limited employee attendance to 50%, a region in which we have several suppliers. With our U.S plants running at 100%, that is not sustainable. While we do not expect any impact to production next week, we are continuing to work with government officials on ways to safely and constructively resume remaining production,” Kumar Galhotra, president of Ford’s Americas and International Markets Group, said in a statement on July 7th, 2020.
Aside from suppliers, Ford runs an engine factory in Chihuahua, in which 24,000 workers are tasked with making engines for it’s larger F-series trucks and the Escape crossover utility vehicle.
The U.S. ambassador to Mexico, Christopher Landau, told the Atlantic Council webinar on Thursday that Ford was struggling to deal with capacity restrictions at the engine factory.“Last night at the dinner I was talking to one of the senior executives from the Ford Motor Company. They were saying they are going to have to start shutting down their factories in the United States as of next week if they don’t get that rolling,” Christopher said, referring to the dinner at the White House during Mexican President López Obrador’s visit to Washington.
President of the National Autoparts Industry, Óscar Albín, said that he had not heard specifically about Ford’s problem, but that in Chihuahua, “many car parts are not being produced to the needs of the car factories in the U.S. and Mexico. In June, production was sufficient because the car factories were not working at 100%, but in July the factories are at 100%.”
When asked if there could be shortages, Albín replied, “it’s not that there could be, there are. And not just Ford, all the factories in the U.S.”
Chihuahua President of Index, who represents manufacturing-for-export industries, Luis Carlos Ramirez, said Ford began implementing 30% capacity at the beginning of June after the automotive industry was deemed essential.
At the beginning of June, under Mexico’s stoplight system, which mandates the eventual reopening of the economy depending on the spread of the virus, Chihuahua was on red. But, a few weeks ago it was lowered to orange and employer capacities were increased to 50%.
Ramirez hopes to soon change to yellow, which would allow businesses to go up to 80% capacity. Kristin Dziczek, VP of industry, labor, and economics at the Center for Automotive Research in Michigan, says that the only surprise in a carmaker experiencing supply chain problems in Mexico due to the pandemic was that it hadn’t happened sooner. She went on to say that trouble at the Chihuahua engine factory would be particularly painful because while all vehicle sales are down, Ford’s U.S. sales dropped by 33% in the second quarter.
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