Dealers across the country are facing increasing shortages of their most popular products, especially models like the Chevrolet Silverado. Yet, in many cases, thousands of those Chevy pickups are sitting in lots outside plants in places like Flint, Michigan; Fort Wayne, Indiana; and Silao, Mexico.
The auto industry has been struggling in the face of a shortage of critical microchips used for everything from engine controls to infotainment systems. Plants around the world have been forced to slow, even halt, production. But some manufacturers have been struggling to find alternatives that could help them rebuild dealer inventories quickly once the chip shortage is resolved.
GM, in particular, has taken a two-pronged approach — both designed to keep assembly lines rolling. In some instances, the automaker has shipped products to showrooms minus some of their digital components. Other vehicles are being parked outside plants, GM planning to add their missing modules once the necessary parts come in.
“We have about 15,000 trucks parked now,” the shop chairman for UAW Local 2209 at the GM plant in Fort Wayne told the Detroit Free Press. Additional “build-shy” vehicles are sitting outside other GM facilities, especially those producing the wildly popular Chevy Silverado and GMC Sierra full-size pickups.
A fluid situation
A GM spokesperson said the precise numbers aren’t available, echoing comments made by the automaker’s Chairman and CEO Mary Barra earlier this week during an earnings call.
“The number changes because, as chips become available,” said Barra, adding that “When we have the semiconductor and can insert the module, we’ll do that and then the vehicle will go through a very thorough and rigorous quality testing.”
At that point, they’ll be shipped off to dealers who, in many cases, have already sold the vehicles. In some cases, customers have been waiting for six weeks or more to take delivery of new vehicles, Mike Jackson, the CEO of AutoNation, the largest U.S. dealer group, told TheDetroitBureau.com.
Computers on wheels are vulnerable to shortages
Today’s vehicles have become computers on wheels, some models requiring 100 or more semiconductors to operate a wealth of new digital features, such as GM’s semi-autonomous Super Cruise system, onboard WiFi and smartphone-style over-the-air update technology. The chips also regulate conventional mechanical systems, such as engine and transmission controllers, helping improve performance and fuel economy while reducing emissions.
Earlier this year, GM made the decision to deactivate some features in order to keep shipping products to customers. Some of its full-size pickups are being delivered without their active fuel management systems, resulting in a loss of about 1 mile per gallon.
“By taking this measure, we are better able to meet the strong customer and dealer demand for our full-size trucks as the industry continues to rebound and strengthen,” spokesperson Michelle Malcho wrote in a statement in March.
Car market bounded back fast from pandemic
The chip shortage is largely being blamed on the pandemic, though a fire at a critical Japanese semiconductor plant has further strained supplies. As the COVID pandemic struck last year and North American auto plants were ordered closed, carmakers slashed orders for electronic components, expecting that sales would remain depressed, even after assembly plants reopened.
Demand for new vehicles came roaring back much faster than expected, however. Last month saw sales solidly exceed pre-pandemic levels. But chipmakers responded to last year’s cut in orders by finding new customers. With millions of Americans locked down and working from home, demand for web cameras, smartphones, game consoles and other consumer electronics skyrocketed. Now, there’s not enough capacity to supply both industries.
While many solutions are being proposed, the general consensus is that the chip shortage will continue through at least this coming autumn, perhaps into 2022.
Ironically, not everyone is sorry about the situation. While dealers may be struggling to replace the cars they’ve been selling, most customers have been willing to wait, said AutoNation’s Jackson. And they’ve largely accepted the idea that the hefty incentives and showroom deals of the past are now sharply pared back.
Automakers, as well, fared significantly better than expected. General Motors this week announced its net income rise tenfold over the first quarter of 2020, adjusted earnings per share of $2.25, meanwhile, handily exceeding Wall Street’s consensus forecast of $1.04.
Trouble ahead
That said, CEO Barra warned that the coming months will be tougher if the chip shortage isn’t resolved.
Ford officials issued a similar alert when the automaker revealed its own, solid Q1 earnings late last month. Ford expects to see production for all of 2021 fall at least 1 million vehicles short of initial plans due to the chip shortage.
The second-largest of Detroit’s automakers is taking a similar build-shy approach on some products, including the F-150 pickup. As of the end of the first quarter had about 22,000 incomplete vehicles sitting in lots across the country waiting for the parts needed to complete them.
You would be a fool to put money down on a vehicle missing chips.