A global shortage of computer chips is the ‘big gorilla in the room’ said the CEO of Stellantis, owner of the Vauxhall plant in Ellesmere Port, as he announced big cuts to production. Tony McDonough reports
Automotive giant Stellantis said it would have to slash production by 1.4m cars during 2021 amid the global shortage of semiconductor computer chips.
Last week Jaguar Land Rover (JLR), which employs more than 3,500 people at Halewood in Merseyside reported quarterly losses of more than £100m saying the loss of production due to the shortage of chips was a major factor.
JLR said it expected the situation to worsen over the current quarter with some experts predicting the global production of chips would not return to normal until 2023. This is particularly troubling for the automotive sector whose vehicles are now full of digital technology.
On Tuesday, Stellantis, owner of the Vauxhall plant in Ellesmere Port, saw its share price rise amid a set of strong results that saw revenues for the first half of 2021 come in at €75.3bn, above market expectations. Net profit stood at €5.9bn.
Analysts say the chip shortage and cuts in production had pushed up the prices of new cars and improved margins. Rising sales of more expensive electric cars have also helped. However, they also says the rise in profitability may not be sustainable if the chip shortage continues.
Stellantis is now the world’s fourth-biggest auto maker after being formed in January via £40bn merger between PSA and Fiat Chrysler. The enlarged business’s brands include Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo, Maserati and Vauxhall.
In early July, Stellantis announced a £100m investment at Ellesmere Port to convert it to produce a new generation of electric vans. The factory, which currently produces the Vauxhall Astra, had long been under a cloud of uncertainty and had shed more than 1,000 jobs over the past two years. The investment secures its future and around 1,100 jobs.
On Tuesday, Stellantis chief executive Carlos Tavares said the global shortage of chips, was “the big gorilla in the room”. He said he expected some improvement in supply in the fourth quarter of 2021 but said long-term visibility remained poor.
Speaking about the latest results, he added: “I would like to thank warmly all Stellantis employees for their outstanding focus on operational excellence and synergies execution that have led the company to achieve very strong H1 financial results.
“While delivering this strong operational performance the company also made significant progress on strategic matters related to electrification acceleration and software, which are fundamental pillars of our strategy.”