A ‘war room’ mentality: How auto giants are battling the Nexperia chip crunch

Global automakers are once again bracing for production disruptions due to a potential shortage of automotive semiconductor chips, this time sparked by the Dutch government amid geopolitical tensions between the U.S. and China.

Honda Motor became the first known automaker this week to reduce production due to the problem that involves chips from Netherlands supplier Nexperia, which is owned by Chinese company Wingtech Technology Co.

The industry was hopeful that a meeting this week between President Donald Trump and Chinese leader Xi Jinping in Asia would provide some relief, but no resolution on the chips issue has been announced.

Volkswagen on Thursday reportedly said it has until at least next week before its supplies impact production, while other major automakers have said they are monitoring the situation around the clock, attempting to mitigate disruptions.

“The chip situation from Nexperia, we have a cross-functional ‘war room’ in the building where I’m sitting that has this as [a] primary job,” Stellantis CEO Antonio Filosa told investors during a quarterly call Thursday. “And every day we are pushing actions and projects to extend our period. There is a day-by-day management of what is an industrywide global issue.”

Such “war rooms” have become a regular practice in the automotive industry amid supply chain disruptions, which have become more common since the Covid pandemic rattled production and deliveries of many parts, including chips, starting in 2020.

Several automotive industry insiders confirmed to CNBC that war rooms have been established in their companies, as they look into alternative purchasing methods. They included working with major suppliers in an attempt to find alternative sources as well as buying on the open market.

“Suppliers across the motor vehicle industry are working to understand the potential effects on production and supply continuity,” MEMA, the largest vehicle supplier association in the U.S., said in an emailed statement. “Chips and diodes are foundational to automotive components and systems, from infotainment systems to door handles, to steering and braking. Even the absence of a single diode or chip can disrupt the manufacture of vehicles.” 

Nexperia

The situation involving Nexperia began late last month, when the Dutch government took control of the company, in what was seen as a highly unusual move, reportedly after the U.S. raised security concerns.

In making the decision, the Dutch government cited fears that tech from the company — which specializes in the high-volume production of chips used in automotive, consumer electronics and other industries — “would become unavailable in an emergency.”

China responded by blocking exports of the firm’s finished products, sparking alarm in Europe’s auto industry.

German automakers are especially sensitive to Nexperia-related disruptions because they rely heavily on large, domestic suppliers, known as “Tier 1s,” and local production facilities and companies, such as Nexperia, despite much of its manufacturing moving to China.

The European Automobile Manufacturers’ Association said this week that carmakers were close to closing production lines because of the chip shortage, which comes four years after a shortage of such parts amid the coronavirus pandemic.