WSJ: Chip shortage hits auto industry

Americans are buying cars in near-record numbers, but a global chip shortage has left dealers with the least amount of product, the worst in decades, according to the Wall Street Journal.

A mismatch in the market is driving up prices, with many buyers looking to drive a lot of new cars out having to wait weeks or months for a new car. Some showroom models sell for thousands of dollars over the list price.

“We’re probably just the biggest new car market of our time, and we don’t have a car,” said David Kelleher, a Philadelphia-area auto dealer.

He recently woke up at 3:30 a.m. in a cold sweat, scrolling through his iPad, checking his inventory of Jeeps and Ram trucks. After some of the best months ever in March and April, Mr Kelleher entered a busy summer selling season with 98 cars instead of the usual 700.

“That really blows my mind,” he said. “It’s going to be longer and more difficult than most people think.”

The lack of access to chips used in everything from safety systems to brakes and engines has forced automakers to cut production of more than 1.2 million vehicles in North America, according to estimates by research firm AutoForecast Solutions. That makes car shortages a common phenomenon.

Dealers had fewer than 2 million vehicles on the ground or on the road at the end of April, about half the normal number and the lowest level in more than three decades, according to research firm Wards Intelligence.

WSJ: Chip shortage hits auto industry

Some GM dealers took their frustration directly to the company’s CEO, Mary Barra. “I had them send me pictures showing they had almost nothing,” the CEO told analysts last week. A spokesman said GM has been in daily contact with dealers about inventory issues and the company plans to Make up for lost production after chip shortages ease.

Chipmakers will spend billions on new capacity, and the White House has made increasing domestic chip production a priority, but building new factories will take years. Many auto industry executives expect the shortage to affect the rest of the year.

The lack of chips has disrupted production at dozens of U.S. auto factories, including cars that have been shut down for months.

Automakers are making models that don’t require semiconductors and park them where they can fit chips. Tens of thousands of these vehicles are located at airports, quarries, racetracks and other temporary parking lots near assembly plants in the South and Midwest.

At the end of March, Ford had many vehicles waiting for chips, with more than 20,000 vehicles parked near the company’s factories alone, a Ford spokeswoman said.

In fact, now is the best time to sell a car. As shoppers have savings, federal stimulus checks are also calling on them to buy. Automakers posted their best U.S. auto sales in two months in March and April. The average price of a new car hit $37,572 in April, up 7 percent from a year earlier and a record for the month, according to demand from research firm JD Power.

To address inventory shortages, some car companies are dropping features that require scarce computer chips.

Stellantis NV has shipped some Ram trucks to dealers without the Electronic blind-spot detection system, Kelleher said. Kelleher further noted that one buyer was frustrated that his new $60,000 truck lacked the ability to walk. The man returned several hours after leaving because no one had the truck in stock.

“Every day, employees at Stellantis are looking for creative solutions to minimize the impact on our vehicles so we can make the products that are most in demand,” the company said in a statement.

GM also said it’s building some full-size pickups without software that helps manage fuel consumption and reduce miles per gallon. “By taking this step, we will be better able to meet strong customer and dealer demand for our full-size trucks,” a spokesperson said.

The shortage is fueling an already hot used-car market. Dealer service managers are pleading with customers to trade cars to boost used-car inventories, one way to offset a shortage of new cars.

Used pickup trucks sold 78 percent more in April than comparable trucks a year earlier, according to auction site Manheim.

That should be a boon for owners like Zerin Dube. He recently started researching replacing the Jeep Wrangler and found used car retailers Carvana and Vroom were willing to pay him slightly more than the $50,000 he paid him three years ago. The problem is finding alternatives.

“It’s a scary time to buy a car,” said the 42-year-old Houston information technology executive, who decided to keep the Jeep.

Chip shortages have left factory workers sitting at home and watching bills pile up while trying to work in state unemployment offices that have been stretched by the pandemic. One of those representatives is Danyelle Anderson, a single mother of four who worked for three years at Ford’s Chicago assembly plant. She applied for the government subsidy after the Explorer assembly line went idle on April 12. She and other factory workers said it would take weeks to see their first checks.

She said the delay caused Ms Anderson to miss rent and car payments, and her cell phone service was cut off because of the arrears. She hopes to receive her first check this week. Meanwhile, she left the car in the garage, worried that it could be repossessed when she was in arrears.

“It was a waiting game and I lost,” Ms Anderson said.

For smaller companies that make products for car assembly plants, chip shortages have hit orders hard. A few months ago, auto plants were working overtime to catch up with lost production early in the pandemic.

Ford installs small lights in Explorers’ side mirrors at Eypex Corp’s Chicago assembly plant. Around the beginning of the year, orders were so high that Eypex President Clarence Martin needed to help workers load goods on the factory floor. But now everything has changed.

Eypex lost one of its biggest customers when the Chicago factory changed in April. Mr Martin said the company’s factory was now running three days a week and the company’s workforce had halved since the beginning of the year.

The whip has been brutal for a supply chain because its complexity makes it more suitable for incremental production. “If you cycle from one extreme to the other, you end up breaking and breaking,” he said.

Chip shortages have pushed up the price of rental cars. Automakers have slashed sales of cars to rental companies, prompting Enterprise Holdings, Hertz Global Holdings and others to take the extraordinary step of buying low-mileage used cars from auctions and dealerships.

Hans Elder, who lives in Los Angeles, said he’s used to paying less than $35 a day at Hertz, his preferred membership. He was surprised to find that the cheapest rent available today is as little as $50 a day, even if there is one. “I was like, ‘Are there really a lot of people renting cars now?’” said Mr Elder, the 46-year-old music executive.

Car dealer Claude Burns said he was so eager to sell cars that he recently told his service staff to consider dropping some customers and focus on repairing used cars. Earlier this month, he owned less than a third of the average new car inventory in the Chevrolet-Cadillac area of ​​Charlotte, North Carolina. He is not optimistic.

“I think by mid-June, we’re going to be stuck with new vehicle inventory,” Burns said.

General contractor Justin Bates, 42, ordered a new GMC Sierra pickup four months ago. He said he didn’t know when the car would arrive and she was on the verge of giving up.

“I’m very frustrated,” said Mr. Bates, who lives in the Salt Lake City area. “GM had 100 ads that went on for two or three months, one month for the truck, another month…and no one could deliver the truck. “

A GM spokesman declined to comment on Bates’ wait.

Derek Gentile, chief executive of EEI Global Inc., a marketing firm that offers test drives of new cars at events such as race cars and state rallies, said last week an automaker canceled about $1 million in contracts due to shortages.

Mr Gentile said: “They can’t produce the vehicle they’re trying to market. So why market something that isn’t in stock?”

A General Motors maker near Kansas City, Michigan, which makes the Cadillac XT4, has been closed since February while the company shuffles chip supplies to install in the more popular models. XT4 inventories fell to around 2,000 nationwide in April, less than a third of normal levels.

Ed Williamson, owner of a Cadillac dealership in Miami, said the XT4 model is now priced $5,000 above the sticker price.

Andrew Arwood) drove more than an hour from his home in Oregon to buy a Subaru Crosstrek sport utility vehicle. When he arrived at the dealership, the salesperson told him the car was guaranteed to have been sold.

All in all, chip shortages are hitting the auto industry hard.


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