Volvo Group slumps after warning chip shortage will idle plants

by BLOOMBERG

Volvo Group declined after the truckmaker said it’ll have to suspend production across its operations because of the shortage of semiconductors that’s disrupted the car industry for months.

Output may come to a standstill for two to four weeks at the beginning of the second quarter with Europe worst affected, according to a spokesman, with a fire in a chip factory in Japan last week exacerbating the situation. Volvo’s production of trucks and construction equipment in other parts of the world will also be affected.

“It will take some time for us to get back on track,” spokesman Claes Eliasson said. “This is a typical issue that happens when the world restarts; you get this kind of disturbance for certain components, as well as strain on the freight industry.”

Volvo fell as much as 7.8%, the most in almost a year, and traded 7% lower at 218 Swedish kronor as of 10:04 a.m. in Stockholm.

The warning from Volvo comes as automakers across the globe are grappling with a shortage of chips amid a resurgence of demand for vehicles as well as consumer electronics. Ford Motor Co. said on Monday it will halt production at a commercial vehicle factory in Ohio, while Volkswagen AG and Toyota Motor Corp. also reported factories going offline.

The production outage will have a negative impact on earnings and cash flow, Volvo said. Visibility into the global supply chain of chips and other components is currently very low, the company said.

“Perhaps this is the canary in the coal mine and we could expect further profit warnings” among manufacturers, RBC Capital Markets analysts Tom Narayan said in a note. “We simply do not know at this point.”