Put in park


How a tiny chip wounded the US auto industry

By Jordyn Grzelewski, Kalea Hall and Riley Beggin - The Detroit News



Ford’s Dearborn truck plant has lost production of more than 19,200 planned F-150s and F-150 Raptors.

Ford’s Dearborn truck plant has lost production of more than 19,200 planned F-150s and F-150 Raptors.


General Motors employees work on the assembly line April 26, 2019, at Fairfax Assembly & Stamping Plant in Kansas City, Kansas. Fairfax Assembly & Stamping Plant has been down since early February because of the chip woes.

General Motors employees work on the assembly line April 26, 2019, at Fairfax Assembly & Stamping Plant in Kansas City, Kansas. Fairfax Assembly & Stamping Plant has been down since early February because of the chip woes.


Hundreds of Ford trucks fill a parking lot near I-96 between Southfield and Evergreen, in Detroit, Michigan on April 25. A global semiconductor shortage has forced car manufacturers to stockpile unfinished vehicles.


The global semiconductor chip shortage arguably is unlike anything the automotive industry has weathered. It is poised to drag on for months longer, cutting into the profits of automakers and their suppliers, delivering uncertainty and lost wages to autoworkers, and giving consumers fewer choices and higher prices on dealership lots.

The crisis — compounded by production issues tied to the coronavirus pandemic — could result in about 2.5 million fewer vehicles being built this year than planned and level a more than $61 billion hit to the industry, according to a forecast from global consulting firm AlixPartners.

At least 70,600 autoworkers have faced shutdowns and shift reductions at U.S. assembly plants represented by the United Auto Workers, according to the Ann Arbor-based Center for Automotive Research, part of more than 50 plants affected in North America by the shortage of chips used in everything from infotainment systems to power steering.

The vital components are sourced primarily from Taiwan and other parts of Asia. The lengthening crisis is stoking anxieties and causing last-minute scheduling inconveniences, creating headaches with overburdened state unemployment offices, and swelling lost wages for those laid off for extended periods.

“I would prefer to be at work than to have this uncertainty hanging,” said Justin Mayhugh, an autoworker at General Motors Co.’s Fairfax plant in Kansas, which produces the Cadillac XT4 and Chevy Malibu and has been down since early February because of the chip woes.

The shortage of essential components that power many of the automated and electronic features in vehicles has exposed strengths and weaknesses within the industry, with some automakers like GM managing to mostly insulate their high-margin products from being impacted while such rivals as Ford Motor Co. cut production of even their most valuable vehicles.

The situation has become so dire that the Dearborn automaker has parked hundreds of its profit-driving F-150 pickups in a Detroit parking lot along I-96, among other places, until it can get enough chips to finish them.

A perfect storm of factors combined amid the onset of the COVID-19 pandemic last year. It was exacerbated in the ensuing months by winter storms in the U.S., a fire at a critical chip factory in Japan and surging demand for new pickups, crossovers and SUVs.

Meanwhile, experts say the crisis is likely to drag on for months — and longer-term solutions are years away. The lingering problem has major implications for Michigan, where deflated financial results — the latest of which the Detroit automakers will begin reporting this week — will mean reduced executive bonuses and hourly profit-sharing payouts from a sector that contributes billions of dollars to the state’s economy.

Brian R. Peterson, director of public policy and economic analysis for Lansing-based Anderson Economic Group LLC, said in a note that there’s not yet enough data to discern the impact on unemployment levels, but “there will almost certainly be some type of impact on the state’s economy if this continues.”

“A reduction in pay would mean these workers would have less disposable (income) to spend on goods and services in the state’s economy, which could impact jobs in other sectors,” he said. “Secondly, jobs throughout the automotive supply chain could be affected as well if automakers reduce the amount of parts they are ordering because they are making fewer cars.”

The shortage’s consequences are far-reaching. According to Goldman Sachs, the crunch affecting some 169 industries in the U.S. could reduce GDP as much as 1% this year.

“It’s a global issue, so there’s no place to hide,” said Dave Andrea, principal and member of the automotive strategy consulting team at Southfield-based accounting firm Plante Moran. “There’s no offset to this, and that’s the issue that comes back to hurt at the corporate level.”

Ford’s Dearborn truck plant has lost production of more than 19,200 planned F-150s and F-150 Raptors.
https://www.limaohio.com/wp-content/uploads/sites/54/2021/05/web1_BIZ-AUTO-SEMICONDUCTORS-CRISIS-2-MCT.jpgFord’s Dearborn truck plant has lost production of more than 19,200 planned F-150s and F-150 Raptors.
General Motors employees work on the assembly line April 26, 2019, at Fairfax Assembly & Stamping Plant in Kansas City, Kansas. Fairfax Assembly & Stamping Plant has been down since early February because of the chip woes.
https://www.limaohio.com/wp-content/uploads/sites/54/2021/05/web1_BIZ-AUTO-SEMICONDUCTORS-CRISIS-1-MCT.jpgGeneral Motors employees work on the assembly line April 26, 2019, at Fairfax Assembly & Stamping Plant in Kansas City, Kansas. Fairfax Assembly & Stamping Plant has been down since early February because of the chip woes.
Hundreds of Ford trucks fill a parking lot near I-96 between Southfield and Evergreen, in Detroit, Michigan on April 25. A global semiconductor shortage has forced car manufacturers to stockpile unfinished vehicles.
https://www.limaohio.com/wp-content/uploads/sites/54/2021/05/web1_BIZ-AUTO-SEMICONDUCTORS-CRISIS-4-DTN.jpgHundreds of Ford trucks fill a parking lot near I-96 between Southfield and Evergreen, in Detroit, Michigan on April 25. A global semiconductor shortage has forced car manufacturers to stockpile unfinished vehicles.
How a tiny chip wounded the US auto industry

By Jordyn Grzelewski, Kalea Hall and Riley Beggin

The Detroit News

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