Expert: Chip shortage to cost auto industry $110B

The semiconductor shortage is now expected to cost global automakers $110 billion in revenue this year, according to global consulting firm AlixPartners, up from the $61 billion the firm predicted in January.

Interruptions to chip supply, including a fire at a Japan semiconductor facility, severe weather in Texas and a drought in Taiwan, pushed the firm to increase its original estimates, which also included the production loss of 2.2 million vehicles. The firm now expects a production loss of 3.9 million vehicles globally, representing a little more than 4.5% of the vehicles automakers planned to build this year.

"These (chip) plants are running full out," said Dan Hearsch, a managing director in AlixPartners' automotive and industrial practice. "There's nothing to absorb the shocks, there's no additional capacity, there's no additional inventory ... all of the cushion has been taken out and you're running on knees with no cartilage."

Automakers here and abroad have been battling the semiconductor shortage since the start of the year. They've halted production at various plants, even shutting down some of the ones that make high-demand trucks.

Ford Motor Co. expects to lose some 1.1 million vehicles of planned production this year, the Dearborn automaker said on its earnings call. The Dearborn automaker is projecting a $2.5 billion hit to its adjusted earnings for the year due to the chip shortage.

General Motors Co. hasn't provided specifics on volume impact. The Detroit automaker has said the shortage could lead to a $1.5 billion to $2 billion earnings hit.

Stellantis NV lost 11% of planned production, or about 190,000 vehicles, in the first quarter because of the microchip shortage, but didn't specify further volume impact. The transatlantic automaker hasn't released financial impact estimates of the shortage.

Japanese automaker Nissan said it's planning to produce half a million fewer vehicles in 2021, CNBC reported Thursday.

AlixPartners sees the situation normalizing with fewer shutdowns by the third quarter.

"You're probably going to see little bumps, a plant slow own or shutdown here and there related to this, but it's not going to be 15 plants like what we currently have," Hearsch said. "It's not going to be widespread and global."

By the fourth quarter, the firm anticipates overtime shifts being scheduled to make up for the losses.