North American Automotive Heat Treating Continues to Drag Down Heat Treatment Sector
The continuing shortage of computer “chips” continues to drag down captive and commercial heat treating in North America. As explained in our previous posts (below) the shortage of computer chips has caused a drastic reduction in North American automotive manufacturing (note that while North America is perhaps the most effected, this is a global issue) which has in turn lead to dramatic slowdowns at part suppliers and commercial heat treaters. While earlier reports suggested that the chip shortage would be resolved by July, this is not the case and there appears to be no definite end date to this issue.
As automotive heat treatment is the largest segment of heat treating in the world we expect heat treatment overall to remain stagnant until this issue is resolved. The photo below shows part of the 50,000 Ford F-150 Pickup trucks being stored in Kentucky until the issue is resolved.
June 2021 Posting; Slowdown In North American Heat Treating-This is Why; We have spoken in the past about how automotive heat treating in North America has slowed dramatically in the past 3 months- our posts on the subject can be seen below. As the largest segment of the heat treating industry in North America is automotive related it is easy to see why the entire heat treatment industry has been rather sluggish of late. It is one thing to talk about it, quite another to see a visual representation. This photo shows some of the 200,000 partly completed Ford F-150 Pick Up trucks which are sitting unsold at the Kentucky Freeway in the USA, unsold until they get “chips”. Not much point in building more vehicles when you have this sort of inventory, however when the issue is resolved we predict that automotive heat treating will set new records.
Automotive Heat Treating To Come Roaring Back July 2021
May 2021 we had a news item about how heat treating of automotive components has seen a dramatic decrease worldwide over the past 2 months due to assembly slowdowns caused by a global “chip” shortage (the original news item is below). As automotive heat treating is the largest segment of the heat treatment industry the effects have rippled through the industry effecting both captive and commercial heat treaters as well as industry suppliers.
However it would appear that the pain will be short lived and that by July of this year automotive heat treating will be in a very healthy position. Let’s correct that statement, automotive heat treatment will actually be in an extremely healthy position.
Several automotive parts suppliers with large in house heat treatment departments, companies such as ZF Industries, Dana, Eaton Corporation, Borg Warner and Linamar have told us that they have been advised by their customers to be prepared for a return to full production by late June or early July at the latest. To elaborate on this a little further all have been advised to limit maintenance shutdowns and summer holidays because pent up demand for new vehicles will require full production. This comes after many industry suppliers have just come off either plant slowdowns or full shutdowns.
“Automotive Heat Treating Slows Due to “Chip” Shortage
Why is the largest heat treating segment in the world, that of automotive heat treating seeing a substantial drop these days?
In early 2020 when COIVD-19 was hitting the world automakers cut back computer chip orders as auto sales slumped which lead to temporary plant closures. Electronics manufacturers, which have enjoyed very strong sales during the pandemic quickly scooped up the excess supply. However since that time car and truck sales have rebounded far sooner than anybody anticipated and automakers have been scrambling ever since to obtain new “chip” supplies in a very tight market. The result has been that all automakers have been forced to close assembly plants in North America, Asia and Europe.
As an example GM recently announced it would shut production at two US plants – in Spring Hill, Tennessee, and Lansing Delta Township, Michigan, in the coming weeks. GM also extended shutdowns at the Fairfax Assembly plant in Kansas City, Kansas, and the CAMI plant in Ingersoll, Ontario, which have both been idled since February 8. And it will continue the shutdown at the Lansing Grand River assembly plant, which has been down since March 15. In addition, GM is halting Chevrolet Blazer production at the Ramos Assembly plant in Ramos, Mexico, during the week of April 19, although that plant will continue to build the Chevy Equinox.
Autoweek Magazine summed us the situation this way; “The chip shortage itself is rooted in the early weeks of the pandemic last spring when the automakers largely shut down, and when suppliers producing microchips for automakers had turned their capacities in the direction of computer and gaming console makers. When the auto industry experienced a sudden bounce-back in most major markets last fall, suppliers were not able to shift away from contracts with these electronics companies, who had experienced rapid growth in consumer demand during lockdowns around the world.
Different automakers have weathered this storm differently so far-some have even stockpiled weeks worth of chips-but the shutdowns at US plants and continued production disruption is expected to continue for months due to these shortages. Some chip makers are already working on expanding their manufacturing footprints, but given the time needed to get new assembly facilities up and running, this is unlikely to have a measurable positive effect for quite some time.
In the meantime, automakers are expected to scramble for chips and endure shortages as the car buying season picks up steam and heads into the summer, just as vaccination campaigns in the US and elsewhere reach a point where demand for new vehicles could seriously ramp up. Just how long these shortages could last is a matter of some debate, but even aside from it, the growth of increasingly complex infotainment systems in cars points to another pressing issue: The semiconductor industry will have to adjust not only to the current shortage, but also prepare for emerging trends in auto manufacturing as a whole, as multiple automakers turn increasingly to tech-heavy electric cars.”
The end result has been that auto parts makers with in house heat treating departments and commercial heat treaters concentrating on the auto industry have in many cases have seen a drastic slowdown in production. One very large auto parts maker and captive heat treater in the US recently told us that in March of this year the company set records for the amount of heat treating they did in house, April in turn is looking to set records for the number of furnaces shut down. This leads to the conclusion that when the chip shortage is corrected the pent up demand for new vehicles will lead to record amounts of auto production and with it a corresponding amount of heat treating.”
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