The global shortage of semiconductors worsens and continues to take a hit on automotive companies. The low supply is a direct result of the pandemic effect and its disruption on a global supply chain which has created a trickle-down impact on local jobs, low car inventory, and increased prices on vehicles.
In recent weeks, GM, Ford, and Stellantis announced production halts across its global footprint including in Asian countries still dealing with major COVID-19 outbreaks and lockdowns.
Some of the auto plant closures and/or changes to shifts will directly impact workers and families across metro-Detroit.
A semiconductor has an electrical conductivity value falling between that of a conductor, such as metallic copper, and an insulator, such as glass. This microchip has become an important material for the operating of many electronics.
The microchip shortage has proven to become costly as a new study predicts a $210 billion in lost revenues this year, estimates AlixPartners, an automotive management consulting firm. The updated outlook is up 91% from its recent May forecast of $110 billion.
“The chip shortage, is one of the biggest crises to hit the automotive supply chain, at least in my career, and I think maybe for a very long time,” said Mark Reuss, General Motors Co. President, in a One-on-One interview with Michigan Chronicle last week at the Detroit Regional Chamber’s Mackinac Policy Conference. “We’re all doing the best we can from an industry standpoint and we’re looking at where, we can allocate chips and build vehicles and then retrofit those vehicles with chips.”
The pandemic effect which has led to an unpresented chip shortage, has also created a standstill in other areas of the automotive job market; auto suppliers and in training. “A lot of our employees or students who would come in and go to employment at one of the supplier companies, there is no work right now,” said Portia Roberson, CEO a, creating 150 t FOCUS Hope, a non-profit organization in Detroit which offers workforce training. “We are waiting patiently to see at what point they think the Big 3 would pick back up, open some of the plants that were otherwise closed, and then the suppliers would start making things again so we can get employees into those facilities.”
In previous weeks, Ford stopped making pickups at its Kansas City Assembly Plant for two weeks. Shifts were cut at two truck plants in Dearborn and Louisville, Kentucky.
GM is shut down pickup truck plants in Fort Wayne, Indiana, and Silao, Mexico, for a week.
Stellantis most recently announced the production of some of its heavy duty Ram pickup trucks will go idle.
In her recent announcement of the MI New Economy Plan, Governor Gretchen Whitmer briefly highlighted how this critical piece of material is coming to Michigan for production.
“We’re helping to open a new chip-maker in Bay City, creating 150 jobs and bring the supply-chain from China to the State of Michigan,” she said.
SK Siltron, a South Korean semiconductor wafer maker, plans to build a $300 million manufacturing plant to aid in the production of this high demand product in the automotive industry.
As state government efforts forge to stabilize this global supply chain disruption by bringing microchips to Michigan for domestic development, Reuss doesn’t envision a full scale change in production strategy of where key components are made.
“We make and sell things all over the world. We don’t have one supply chain. Our supply chain is global. So if we’re making things in China for the Chinese market, we’ll have a supply chain that is both, the United States wherever, plus China. We’re running eighty-eight-billion-dollars through our supply chain every year for our vehicles. So they’re global and these are big global companies that do a great job. I don’t think those decisions are geographically based always. But certainly, if there’s an American company that’s going to supply an American car that’s made and produced in the United States, then, we’re going to get as close to that plant as we can.”
Reuss expects “normalization” and stabilization at some points as even federal government is making the call to expand capacity for semiconductors in the United States.
“There’s no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they’re undertaking only the best options,” said Dan Hearsch, managing director at AlixPartners.
Hearsch evaluation may be of sound advice as microchips aren’t the only issue for the auto companies as pandemic effect looms. Steel and labor shortages are some of the other disruptions in the industry.
“There really are no ‘shock absorbers’ left in the industry right now when it comes to production or obtaining material,” he added.
“Virtually any shortage or production interruption in any part of the world affects companies around the globe, and the impacts are now amplified due to all the other shortages,”.
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