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Jeep Wrestles With Global Semiconductor Shortage; 1,600 Additional Layoffs at Illinois Plant

Published: May 29, 2021
The 2019 Jeep Cherokee was introduced during a press preview at the 2018 North American International Auto Show (NAIAS) in Detroit, Michigan, on Jan. 16, 2018. Car makers appealed to Americans' deep love of SUVs and trucks at the Detroit Auto Show, unveiling a host of choices from luxurious to utilitarian, while also beefing up the humble sedan. (Image: JEWEL SAMAD/AFP via Getty Images)

The worldwide semiconductor shortage has hit Jeep Cherokee’s U.S. manufacturing arm hard, forcing the company to lay off an additional 1,600 Illinois employees as they struggle with the fallout from the global crisis. 

Stellantis, previously known as Fiat Chrysler, announced this week that it will cut one of two remaining shifts at its Belvidere Assembly Plant by July 26. 

The announced layoffs are in addition to 1,300 jobs that were previously lost when the plant cut its third shift amidst pandemic shutdowns and global supply chain pressure.

Company spokeswoman Jodi Tinson told NBC Chicago that the company is trying to “balance sales with production” and that the factory’s situation “has been further exacerbated by the unprecedented global microchip shortage.”

Reopening delayed

Some operations at the Belvidere Assembly Plant have been halted since late March and Jeep is delaying the reopening of the plant for at least another month. 

Last year, the company saw a 14 percent drop in deliveries of their Jeep vehicles amid pandemic shutdowns and subsequently decided to ration its available semiconductors for its more profitable brands. 

Jeep is not the only auto manufacturer feeling the fallout from the semiconductor shortage. Numerous auto manufacturing facilities were impacted, including plants operated by General Motors, Ford and Volkswagen, which have all previously shut down sections of their operations in the face of the compounding crises. 

The chip shortage “would impact the production of 1.3 million cars and vans globally in the first quarter this year, according to research firm IHS Markit,” the South China Morning Post reported.

The auto manufacturers’ struggle to obtain an adequate supply of semiconductors is — in some ways — a crisis of their own making. 

Anticipating a severe drop in sales due to the pandemic, numerous auto manufacturers erroneously cancelled orders for semiconductors, spurring chip makers to rethink their approach in the face of demand loss. Chipmakers retooled their production lines to focus on the more profitable consumer electronics market, which saw a rise in demand for laptops, smartphones, and next generation gaming consoles. 

Semiconductor crisis rages on

The COVID-19 pandemic placed extreme pressure on supply chains across the globe hitting the semiconductor manufacturers particularly hard. Relief for the embattled sector is not expected until sometime in 2022.

Every industry that relies on a steady supply of semiconductors has been affected by the global shortage from console makers to home appliance manufacturers even automated dog-washing station manufacturers.

Colette Kress, chief financial officer of GPU supplier Nvidia stated at the company’s annual investor day on April 12 that “overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean.” He expects “demand to continue to exceed supply for much of this year.”

Adding to the crisis, Chinese tech companies have been hoarding semiconductors in anticipation of further U.S. sanctions and several chip manufacturing hubs have been hit by extreme weather including  fires, blizzards, and droughts impacting production, reported Slate.

While the crisis continues, manufacturers and governments are investing billions of dollars in order to meet current and future demand for semiconductors. Taiwan Semiconductor Manufacturing Co., (TSMC) announced they would be investing $100 billion over the next three years to expand their manufacturing capacity while the Biden administration included $50 billion in subsidies in an infrastructure package to encourage additional chip manufacturing.

On May 27, the U.S. Senate advanced a broad bipartisan bill, the “Innovation and Competition Act of 2021,” that earmarked an additional $54 billion dollars to bolster semiconductor, microchip, and telecommunication equipment production on U.S. soil.