Stellantis will pause production at a factory in Italy that builds Fiat and Jeep vehicles because of reduced demand, and a shortage of microchips and other parts, Italian union sources said.
More than 7,000 workers at the plant in Melfi, southern Italy, will be furloughed for a week starting Monday, union sources said.
The factory builds the Jeep Compass and Renegade compact SUVs and the Fiat 500X compact crossover.
Stellantis, the parent company of Jeep and Fiat, confirmed the planned stoppage and said it was due to "market fluctuations" and other issues linked to the coronavirus crisis.
In a statement sent to Automotive News Europe, Stellantis said it was adapting its industrial activity “daily, plant by plant, to automotive market trends and by taking into account the different situations we are facing,” such as parts supply and pandemic confinements.
Italian news media reported the stoppage this week, citing union sources.
Global automakers have been caught off guard by the shortage of crucial semiconductors, used for everything from computer management of engines to driver-assistance features such as emergency braking, highlighting the need to cut dependency on Asian manufacturers. The chip shortage has led several automakers, including GM, Volkswagen, Ford and Toyota to cut vehicle production.
A union source said the main reason for the temporary production freeze was disruptions in part supply.
"We've been told by the company that several parts were affected, but that the main problems are with electronic ones, such as microchips," he said.
The group is having particular problems obtaining an electronic part that is shipped from China, a second union source said, though he added that all carmakers were being affected, not just Stellantis.
Production was also halted at Melfi for two weeks in January, a measure that affected about half of the workforce.
The Melfi plant accounts for half of Stellantis' passenger car production in Italy. Last year output fell by 7 percent to 229,848, according to the FIM union. An extended shutdown last spring because of COVID-19 restrictions was partly offset by the start of European production of the Compass and plug-in hybrid versions of both the Compass and the Renegade.
According to figures from JATO Dynamics, Fiat sold 58,467 500Xs in Europe in 2020, a 35 percent decline from 2019. Compass sales were 47,037, a drop of 26 percent; and Renegade sales were 58,617, a 25 percent decline, according to JATO.
Furloughed workers in Italy usually receive a reduced wage from a government "cassa integrazione" fund. That fund has been used since the start of the pandemic to cover most temporary layoffs attributed to the coronavirus crisis. The government has also forbidden permanent layoffs until March 31, 2021, in an effort to mitigate the impact of the crisis.