Yahoo Finance Carty: Once Again, the Auto Industry Waits
From the May 2021 issue of Car and Driver.
The ripple effect of the pandemic has hit the auto industry where it hurts—right smack-dab in the supply chain. The microchips that control everything from your 30-way power-adjustable massaging seat to your engine's fuel injectors are as scarce as toilet paper was a year ago. That messes things up for automakers, which can no longer build as many cars as they'd like. As we went to press with the May issue of Car and Driver, the chip shortage was stopping production of almost 2 million vehicles globally. The numbers have only gotten worse.
Last week, Bloomberg highlighted a recent report from the global consulting firm AlixPartners that estimates 3.9 million vehicles will be impacted by the shortage. AlixPartners predicts that'll eventually add up to $110 billion hit the global sales market this year—even with the price of vehicles rising. Last month, announcing its second quarter earnings, Ford said it expected the chip shortage to impact 1.1 million vehicles and cost the company $2.5 billion.
This is not the first time something like this has happened. In 2004, a booming Chinese economy suddenly meant automakers couldn't find steel. That shortage sent GM to court with two of its suppliers over pricing, and Nissan and Suzuki paused production altogether. A violent labor dispute at a transmission-parts supplier in Gurugram, India, forced Ford to temporarily stop production at its Oakville, Ontario, plant in 2009. Luckily, nobody seemed to notice or care that there weren't as many Ford Flexes on dealer lots. In 2011, the tsunami that hit Japan wreaked havoc throughout the supply chain, even limiting the color of car you could find. At the time, the world's supply of Xirallic, a pigment with metal-coated flakes that makes pearlescent paints look shimmery, came from a single plant, which was exposed to radiation after the tsunami damaged a nearby nuclear reactor.
Sometimes parts get stuck in shipping ports, waiting to clear customs. Sometimes there's a fire, a tornado, or a flood. Sometimes a supplier goes bankrupt or can't increase production of a key material like nylon or resin, something you may not even know is in your car. Other times it's something you'd definitely notice is missing, like a steering wheel.
Supply-chain managers, the folks who make sure these gaps happen as little as possible and rush in to find solutions when they do, are the unsung heroes of automotive manufacturing. But they aren't magicians. They can't conjure microchips in a world increasingly reliant on computer brains. Like so many of us for so many reasons this past year, they just have to wait.
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