CEO of the North America unit says outbreaks of covid-19 in Malaysia have aggravated bottlenecks in supply chains and hampered US auto production:
Scott Keogh, an executive who heads the Volkswagen division in the Americas, foresees the normalization of automobile production in the United States only in the second half of 2022 due to the covid-19 outbreaks in Malaysia, which have aggravated bottlenecks in supply chains.
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“Normal – when we can make all the cars we want exactly when we want to – I don’t think it will be possible until the second half of next year,” said Scott Keogh, CEO of Volkswagen’s North America unit, in an interview at the company’s factory in Chattanooga, Tennessee.
The global semiconductor deficit has reduced car production worldwide and left showrooms with fewer models for sale, even with increased demand during the pandemic.
In the middle of the year, Volkswagen was forced to stop production of the Taos and Tiguan SUVs at the Puebla, Mexico plant, and is shifting chips destined for the slower-selling Passat sedan to producing the more profitable Atlas SUV. , manufactured in Chattanooga. It also prepares the Tennessee plant to produce the ID.4, its first electric SUV, in June of next year.
The Chattanooga plant operates at full capacity – when it has chips – and plans to hire to further increase production, according to Johan De Nysschen, director of operations at Volkswagen’s Americas division.
The pandemic has exposed a “structural gap” between chip production and demand, and the problems caused by the virus have only exacerbated the imbalance, Keogh said. But the situation was not entirely negative for automakers.
Tight inventories pushed prices up and resulted in minimal spending on incentives, which improved results. That helped Volkswagen’s US unit to profit in 2020 for the first time in eight years, Keogh said, after a revamp of the sedan lineup for SUVs.
When the semiconductor shortage finally eases, Volkswagen plans to have fewer cars on dealer lots because it has proven more profitable for manufacturers and dealers, Keogh said.
“Going back to the days when there was an offer for 100 to 120 days will not happen,” he said. “Now people have offers for 30 to 40 days and it’s working very well. Something around 40 to 50 days would be great.”