Chip shortage to cost automakers $110 bln

Honda is the latest firm to say it's paying a price for the global shortage of computer chips.

On Friday (May 14) the Japanese company said the silicon drought affected 100,000 vehicles last year.

And it predicts the problems will persist through the first half of 2021.

Overall, the shortage could cost the global auto industry $110 billion in lost revenues this year.

That's according to an estimate by consultancy AlixPartners.

It says the crisis will hit production of 3.9 million vehicles.

Volkswagen, Ford and General Motors are just some of the big names to cut or suspend some output.

Now AlixPartners says firms will have to respond by building stronger ties to chipmakers.

Automakers have been reluctant to make long-term commitments on chip supply, for fear of being stuck with financial liabilities over such agreements.

But the consultants say the risk of losing production to shortages has changed the equation.

Other responses are possible.

This week, Ford said it was redesigning some parts to use chips that are more readily available.