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July 13, 2020

Ford’s Mexico engine supply problems sound a warning for global supply chains

Ford in the US is facing production shortages due to COVID-19 production constraints at an engine plant in Mexico.

By Sam Duke

Ford in the US is facing production shortages due to COVID-19 production constraints at an engine plant in Mexico.

Reports say that Ford’s Chihuahua engine plant is operating at just 50% capacity due to the coronavirus and that Ford Super Duty truck production at Kentucky is in line to be impacted.

Kumar Galhotra, president of Ford’s Americas and International Markets Group, pointed out the variance in current rates of capacity utilisation between its Mexico and US manufacturing operations. “Due to COVID-19, the State of Chihuahua in Mexico has limited employee attendance to 50 percent, a region in which we have several suppliers,” he said. “With our US plants running at 100 percent, that is not sustainable. While we do not expect any impact to production next week, we are continuing to work with government officials on ways to safely and constructively resume remaining production.”

The news from Mexico serves as a wider warning to the auto industry that the COVID-19 pandemic is far from over and that international supply chains remain very vulnerable.

Ford has ramped up vehicle production rapidly at some of its US plants, which has exposed the fragility of its supply chains in the context of constrained engine supply from Mexico.

Mexico is an important low-cost production source and North American vehicle production supply chains are highly integrated across the US, Canada and Mexico. Mexico is also emerging as one of the worst hit countries by the coronavirus – which explains actions by the authorities such as in the State of Chihuahua to limit employee attendance to 50 percent.

About 40 percent of the parts required to assembly vehicles in the US are imported from Mexico.

Mexico is used for a variety of auto parts but is especially dominant in labour-intensive components such as wiring harnesses and fabric parts such as seat covers. Without such supplies whole vehicle manufacture is impossible.

The international nature of automotive supply chains also means manufacturing plants in different countries may be at very different capacity utilisation levels due to significant variations in the pandemic’s impact and local controls on population movement.

As the COVID-19 pandemic comes under control in some parts of the world, cases are rising in other places, making global supply chains more difficult to manage. Ford’s difficulties over engine supply serve to highlight the currently fragile state of automotive supply chains across the globe.

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