(Bloomberg) -- As the semiconductor shortage hobbling the global automotive industry has worsened, its cost as a hit to sales has almost doubled to $110 billion, up from an earlier estimate of $61 billion.That’s the latest assessment of AlixPartners, a global consulting firm closely monitoring the widening crisis. It also now says the world’s carmakers will lose 3.9 million vehicles of production to the chip shortage this year, more than its prediction four months ago of 2.2 million. That’s about 4.6% of the 84.6 million vehicles that AlixPartners had projected in total production for 2021.Automakers issued warnings in earnings reports in recent weeks that the chip shortage would get worse before it gets better. Ford Motor Co. and General Motors Co. each predicted the second quarter would be the worst of the calamity, as they are forced to idle factories for lack of the essential components. But the industry isn’t likely to see signs of recovery until the end of the year, according to the AlixPartners assessment.“It’s still deeply impacting the third quarter,” Mark Wakefield, head of the firm’s global automotive practice, said in an interview. “We don’t really have it getting into a recovery mode at all until the fourth quarter.”The timing takes on added importance because the chip-related production cuts are driving up prices of new and used vehicles, contributing to higher inflation in the U.S. Another researcher, LMC Automotive, predicts global production will be cut by almost 3 million vehicles in the year’s first half alone.Read More: Record Surge in Used-Car Prices Is Key Culprit in InflationFord Chief Executive Officer Jim Farley said Thursday the company is redesigning its vehicles to use the most common and “accessible” chips. It also is planning to boost semiconductor inventory and sign contracts directly with chipmakers, rather than go through an auto supplier.“We really see the second half improving,” Farley said at Ford’s annual shareholders meeting. “We’re starting to get more confidence in the chip supply.”The crisis that grew out of pandemic-related production cuts has been exacerbated by a fire at semiconductor factory in Japan and this winter’s historic cold snap in Texas that curtailed output.“There are up to 1,400 chips in a typical vehicle today, and that number is only going to increase,” said Dan Hearsch, managing director of AlixPartners’ automotive practice. “The top priority for companies right now is mitigating the best they can the short-term effects of this disruption, which may include everything from renegotiating contracts to managing the expectations of lenders and investors.”Supply ChainAlixPartners, which helped guide GM through bankruptcy more than a decade ago, estimated in January that the chip shortage would cost the auto industry $61 billion in lost revenue. As the crisis has worsened, the firm has begun working with automakers to overhaul supply-chain management to try to avoid this happening again.The first lesson automakers are learning, Wakefield said, is they are no longer “the 800-pound gorilla” in supplier relations, especially with chipmakers who also serve tech giants that pay higher prices for more advanced semiconductors for mobile phones, laptops and video games. Suppliers like that can’t be strong-armed into dancing to Detroit’s tune.Automakers are now in a situation “where they’re eye-to-eye and not the big dog on the street,” Wakefield said. “Reducing costs has been a priority at automakers. It’s great to save money, but not if you can’t build cars.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
DETROIT (Reuters) -Ford Motor Co, in response to the global semiconductor shortage, is redesigning automotive components to use more accessible chips, the No. 2 U.S. automaker's chief executive said on Thursday. Jim Farley, speaking at Ford's online annual shareholder meeting, also said the company is weighing other strategies for the future, including building a buffer supply of chips and signing supply deals directly with the foundries that make the wafers used in semiconductors. Automakers typically get their chips through their largest suppliers, not dealing directly with chip makers and the foundries that make the wafers used to assemble the semiconductors.
(Bloomberg) -- Amazon.com Inc. is deepening its ties with Ford Motor Co. in a deal that will integrate Alexa into the entertainment system of F-150 trucks and other models.Amazon’s digital assistant will roll out to about 700,000 Ford vehicles this year, including new and recent models of the pickup, as well as the Bronco and the electric Mustang Mach-E in the U.S. and Canada. New and existing vehicles powered by Ford’s SYNC-4 in-car software will also offer drivers the option of invoking Alexa hands-free.“It’s going to grow to millions really quickly,” said Alex Purdy, who leads business operations for Ford’s Enterprise Connectivity group.For Amazon, the six-year deal is the broadest single rollout of Alexa in vehicles to date, a rare instance of an automaker integrating the voice-activated software natively. That means drivers can access Alexa directly from the dash entertainment system without using a phone, downloading an app, or pressing a push-to-talk button. The companies declined to disclose financial terms of the agreement, which builds on a commercial deal announced in 2017.“It’s very expansive,” Dave Limp, an Amazon senior vice president who leads the company’s devices and services group, said of the deal. “Ford has been working for the past couple of years to enable their cars to have this hands-free experience. We were able to take advantage of it.”Ford will provide drivers with free internet connectivity that enables Alexa features, such as asking for directions and messaging -- but not music streaming -- for three years. After that they’ll likely need to pay for a data or software plan, which Ford hasn’t detailed yet.The dashboard has become prized real estate for automakers and tech giants eager to extend their reach. Despite its leading position in home digital assistants thanks to Alexa and the Echo smart speaker, Amazon has been playing catchup on the road. Many drivers prefer to link the phone they carry to their vehicle, putting Apple Inc. and Alphabet Inc.’s Google in a commanding position thanks to their domination of the smartphone market.Ford, which has been collaborating with software giants since a landmark deal with Microsoft Corp. some 14 years ago, is hedging its bets these days. In addition to Alexa, Ford vehicles also support Google and Apple voice software. The automaker in February announced a six-year deal to use Google’s cloud-computing services; in 2023 Ford will start using Google’s Android operating system to power its dashboard infotainment screens.Under Chief Executive Officer Jim Farley, Ford is trying to move from selling cars to customers one-at-a-time, to a purveyor of services for the driver and passengers. That business model is made possible by over-the-air software updates to things like the entertainment system and maintenance alerts, tools that are just beginning to arrive in Ford vehicles.Not only will the technology enable new paid services, it could also save drivers costly trips to the dealer by providing over-the-air software fixes and predictive maintenance, Purdy said.“We think it’s big dollars,” he said. “We also think our customers are asking for it.”Amazon earlier this year started letting carmakers use Alexa’s building blocks to create their own software, a challenge to Cerence Inc., the leading builder of custom voice software for auto companies including Ford. As part of the deal announced Thursday, Ford and Amazon will set up a joint team to work on custom Alexa applications for commercial fleet operators.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.