Honda will temporarily idle much of its U.S. and Canadian manufacturing network next week, the automaker said, due to a variety of problems ranging from the COVID-19 pandemic to microchip shortages.
Automakers, in general, have struggled to cope with problems that have slowed and, in many cases, closed plants in recent months. The closures have compounded a situation in which the industry has struggled to rebuild vehicle inventories in the wake of a two-month, continent-wide shutdown last spring due to the pandemic.
“In some way, all of our auto plants in the U.S. and Canada will be impacted, with most of the plants temporarily suspending production during the week of March 22,” Honda said in a statement e-mailed to TheDetroitBureau.com. “Since this is a fluid situation that requires flexibility, the timing and length of production adjustments could change.”
COVID cuts compounded by chip shortages
The auto industry has faced a series of challenges keeping plants running at a normal pace over the past year. The COVID pandemic let to worldwide production cuts. In the U.S., Canada and Mexico plants were closed for two months last spring. Even after reopening, manufacturers like Honda faced challenges as they struggled to implement protocols aimed at preventing the spread of the virus on factory floors.
The pandemic had a cascading effect. It led to a severe shortage of the microchips now used in every new vehicle, among other things. That precipitated temporary closures at plants around the world impacting virtually every major automaker, from Tesla to Toyota.
Honda noted in its statement, “We continue to manage a number of supply chain issues related to the impact from COVID-19, congestion at various ports, the microchip shortage and severe winter weather over the past several weeks. Our purchasing and production teams are working to limit the impact of this situation and are adjusting production as necessary in order to carefully manage the available supply of parts and meet the needs of our customers.”
Honda closures limited to U.S., Mexico — for now
The Honda closures take place during the week of March 22. Plants impacted include those in Alabama, Indiana and Ohio, as well as in Ontario, Canada. The carmaker’s Mexican plants are not covered by the announcement.
The automaker said it would not release specific information on how the closures will impact specific plants or product lines. Sam Fiorani, the vice president of global vehicle forecasting at AutoForecast Solutions, told the Reuters news service those factories typically produce about 30,000 vehicles a week.
In the wake of last year’s industry-wide closures, inventory levels were expected to run about 1 million vehicles below normal by now, J.D. Power forecast. Manufacturers were hoping to narrow the gap by scheduling overtime and, in some cases, boosting line speeds for popular products. The latest setbacks, the chip shortages in particular, have short-circuited such efforts.
Automakers expect earnings to take a major hit
For consumers, the impact translates into short supplies of many products, especially SUVs and pickups. For manufacturers, there will be a sizable financial hit. Ford has warned that the chip shortage alone could reduce earnings by $2.5 billion this year, General Motors putting its number at $2 billion.
While Honda did not put out a dollar figure it last month warned that it expects to sell about 100,000 fewer vehicles worldwide this year due solely to the chip shortage.
The third-largest Japanese automaker said Tuesday it will minimize the impact of the latest plant closures on its U.S. and Canadian workers.
“On days where we have adjustments or temporary production suspensions, associates can choose to come into work for alternate work activities, or they can use their PTO (Paid Time Off) with pay or take the day off without pay,” it said in its statement.
Asked to clarify what that means, Honda spokesman Chris Abbruzzese told TheDetroitBureau.com that, “In those instances when production is temporarily suspended, our Honda associates will continue to have the opportunity to work at the impacted plants.”