PARIS, (Reuters) – Plastic Omnium has reported a 14% decline in third-quarter sales. This is because the French parts producer for cars reduces its production costs to counter the effects of component shortages.

Major carmakers around the world have had to cut down or suspend production due to a chip shortage. This has impacted demand for parts and cars.

According to the group that makes car fuel systems, bumpers, and tailgates, sales were 1.79 billion euro ($2.08 billion) in 2016, down from 2.10 million a year prior.

Laurent Favre, Chief Executive Officer said that “we are substantially sharpening our emphasis on cost reductions and cash generation”. She cited an “exceptionally volatile” market due to ongoing shortages of semiconductor chips.

According to Reuters, Volkswagen (DE) is Plastic Omnium’s largest customer for 2020. This year, the main plant has produced the fewest cars since 1958.

Plastic Omnium stated that it is in discussions with suppliers in order to reduce rising prices, which was exacerbated due to the rise in raw material costs.

The company also stated that its hedges for rising electricity and gas prices this year had been extended to the end of 2023.

Supply-chain problems have hindered the industry’s efforts to overcome pandemic lockdowns, and move towards electric cars.

Favre stated that the company supplies both hydrogen fuel tanks as well as emissions control systems and sees sustainability as an advantage, not a limitation.

Plastic Omnium reiterated its financial outlook for 2021. However, it warned that production would be affected by developments in semiconductor chip supply and auto manufacturer strategies.

($1=0.8593 euros)