Around 1,000 Stellantis workers who build 9-speed transmissions are once again on furlough as the world’s microchip shortage drags on, causing huge ripple effects in the nation’s automotive industry.
Matt Jarvis, president of United Auto Workers Local 685, which represents the plants in Kokomo and Tipton, said the 9-speed transmission lines have all been reduced to day shift operations, cutting the production of the unit in half. He said the plants are now putting out around 1,080 9-speeds every day, nearly all of which are being shipped to Brazil.
That’s led to the local furloughs, which are set to end on May 3 but could be extended depending on the global demand for the transmissions.
Around 1,800 local workers were initially furloughed for the first two weeks of February. The furloughs started after then-Fiat Chrysler Automobiles paused production of the Jeep Compass in January. The vehicle is assembled in Toluca, Mexico, and uses the 9-speed transmission.
That led Stellantis, the company resulting from the Peugeot-FCA merger, to halt production of the 9-speed in Kokomo and Tipton for two weeks to avoid an overbuild of the transmissions. Those furloughs were extended for some workers until the end of February.
Now, with five Stellantis assembly plants shuttered across North America, the company has once again pulled back on the production of the 9-speed.
“It’s the same issue with microchips and semiconductors,” Jarvis said. “They’re having a hard time getting them and keeping the assembly plants running.”
However, production of the 8-speed transmission is still going strong at the local facilities. Jarvis said that’s because vehicles such as the Jeep Wrangler and Dodge Ram, which take the 8-speeds, are still seeing strong sales.
“They’re concentrating on building the high-profit vehicles,” he said. “Our sales are still really good on those vehicles, so they’re still trying to produce those and get them out to the dealerships.”
The pandemic-fueled chip shortage started when consumer demand soared for more vehicles as people looked to avoid using public transportation. Demand also spiked for devices such as smartphones and gaming consoles that people use for entertainment while stuck at home.
The chips, also called semiconductors, have become part of the backbone of the auto industry, controlling nearly all electronic features inside a vehicle.
The shortage has had a major ripple effect through the automotive industry, with companies such as Ford, General Motors and Honda pausing production at some plants due to a lack of chips.
The White House on Monday held a virtual CEO summit where President Joe Biden met with executives from the auto, tech, biotech and consumer electronics industries to discuss the ongoing semiconductor chip shortage.
Analysts say the shortage is costing automakers billions of dollars and forcing massive temporary layoffs around the world.
Jarvis said this is the first time he’s ever seen a parts shortage lead to so much economic devastation in the auto industry.
“I’ve never seen anything like this,” he said. “Not on a parts shortage. Usually, a parts shortage might affect production for two or three days. I’ve been with the company 27 years, and I’ve never seen it shut down assembly plants like this.”