Ford CEO says rare earths shortage forced it to shut factory

Ford CEO Jim Farley recently spoke out about the impact of a rare earth minerals shortage on production, causing the automaker to temporarily close one of its plants last month. In an interview with Bloomberg TV, Farley highlighted the crucial role that rare earth minerals play in automobile production, enabling essential features such as windshield wipers, seat belts, and speakers to function properly.

The U.S. heavily relies on China for about 90% of its rare earth minerals, making the recent export controls imposed by Beijing a significant challenge for American automakers. These controls, announced in April as part of retaliatory trade measures amid a trade war with the U.S., require businesses to obtain licenses to export rare earths. This has led to delays and disruptions in the supply chain, impacting companies like Ford.

Following negotiations between U.S. and Chinese officials in London on June 11, an agreement was reached for China to resume regular exports of rare earths to the U.S. This development offers some relief to automakers like Ford, who have been struggling to secure a stable supply of these critical minerals.

Farley described the current situation as “hand-to-mouth,” emphasizing the day-to-day challenges faced by Ford due to the limited availability of rare earth minerals. CFO Sherry House also addressed the disruptions caused by the new restrictions, highlighting the additional administrative processes required to obtain rare earth minerals from China. While Ford is currently managing the situation, there is a possibility that it could become a larger issue in the future.

Despite these challenges, Farley remains optimistic about the progress in trade talks between the U.S. and China. He expressed hope that the supply constraints on rare earth minerals would ease soon, mentioning that Ford has submitted applications to China’s Ministry of Commerce for approval to export more rare earths.

Overall, the rare earth minerals shortage poses a significant hurdle for Ford and other automakers, underscoring the importance of a stable and reliable supply chain for critical components in the automotive industry. The resolution of trade tensions and the resumption of regular exports from China offer some hope for a more stable future for companies like Ford.