While the U.S. economy slowly recovers from the effects of Covid-19, auto makers are seeing more sales each quarter. In fact, last quarter, General Motor’s U.S. retail sales grew 19 percent. While the auto industry seems to be doing well on the sales side, there are problems within the supply chain that are beginning the affect their performance. An ongoing semiconductor chip shortage has forced several of Ford’s and General Motor’s U.S. plants to halt production.
The chip shortage is due to shutdowns amid the earlier months of the pandemic – with plants abrupty shutting down for month-long stay-at-home orders. The two main chip manufacturers are in Asia, leaving the U.S. and other countries awaiting new chips for four or five weeks at a time. The pandemic-related chip shortage is affecting nearly every major automaker, with the auto industry projected to make 1.5 to 5 million fewer vehicles this year.
Earlier this month, GM announced they would be halting production at three U.S. factories and extending shutdowns at another three. Tennessee, Michigan, and Kansas will see the effects of the shutdowns as about 10,000 workers hold of on returning to factories for another two-to-three weeks.
Hourly GM workers represented by a union “will receive about 75 percent of their compensation through a combination of unemployment and supplemental benefits,” a GM official said by email.
“We continue to work closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impact on GM,” he said. “Our intent is to make up as much production lost at these plants as possible.”
Ford said they would halt production at three facilities and cut production entirely at the Avon Lake, Ohio plant. Ford did not say how many workers will be affected.
The auto industry is not alone – virtually every technology industry relies on semiconductor chips – from cellphones, to cars, to computers. Currently, Congress is deciding on the approval of $50 billion of federal funds to help domestic chip production. Although the funds wouldn’t be enough to help every U.S. company out of the crisis, it would get the ball rolling on a domestic chip supply.
While some professionals say the chip shortage will last a couple quarters, some are saying it will last well into 2022. Regardless, industry leaders are doing everything they can to get a supply chain started within the U.S.
“We do believe we have the ability to help,” said Pat Gelsinger, who recently took over as CEO of intel, the largest U.S. Semiconductor producer. But “I think this is a couple of years until you are totally able to address it,” he said. “It just takes a couple of years to build capacity.”
Gelsinger and another semiconductor chief – Tom Caulfield of GlobalFoundries, headquartered in Santa Clara, California – said they lobbied at the meeting for the U.S. to set an aggressive goal for expanding domestic chip manufacturing. Only about 12 percent of the world’s semiconductors are made in the United States. Caulfield said he called for a doubling of that market share, while Gelsinger wants to push it above 30 percent.
“A lot of the discussion was, let’s not waste this crisis. Let’s take the lessons learned — we should have more manufacturing in this country,” Caulfield said in an interview.