Semiconductor shortages have tied up automobile production across the U.S. for nearly a year and now Congressional Democrats propose spending $2 billion to develop chip production in the United States as part of President Joe Biden’s “Build Back Better” plan.
Rep. Dan Kildee (D-Michigan), a member of the Ways and Means Committee which is working out details of the $3.5 trillion budget reconciliation bill critical to Biden’s plan, proposed spending to expand semiconductor production capacity in the U.S.
“Global supply chain disruptions are hurting local workers,” said Kildee, whose mid-Michigan district includes the City of Flint, where General Motors builds heavy-duty pickup trucks, in a statement.
“Our dependence on foreign suppliers for semiconductors has resulted in temporary furloughs for auto workers and production stoppages across the country. To stop plant shutdowns that hurt workers, we must end our overreliance on foreign products, especially the semiconductors we need for our cars and so many other electronics.”
Shortage forces GM to revise output
Paul Jacobson, GM’s chief financial officer, told analysts at last week’s 2021 RBC Capital Markets Global Industrials Conference, the automaker expects to scrub an additional 100,000 units from its production schedules during the third quarter, doubling the number of vehicles lost due to parts shortages since last spring.
During the meeting, Jacobson said COVID-19 outbreaks in Malaysia further disrupted the production of semiconductors. The shutdown in Southeast Asia extended the shortage, which GM’s planners previously thought would begin to ease this fall, he said.
Other carmakers, most recently Toyota, which announced last week it plans to cut another 300,000 units from its annual production target due to the ongoing chip issues. However, it’s not just the lack of chips hampering its production, officials said. Suppliers building other parts are being pinched due to the aforementioned rise in COVID cases in Vietnam as well as Malaysia.
Ford, and Mercedes-Benz, have lost production due to the semiconductor shortages that have curtailed production all over the world.
EV tax credits pending in Congress
Kildee also a co-author of a new tax credit proposal designed to encourage to purchase of electric vehicles.
Under the tax provisions pending before Congress, there would be a $7,500 consumer credit for EVs. But EVs assembled in the U.S. with unionized labor also would be eligible for a $4,500 bonus and an additional $500 bonus for batteries built in the U.S. with union labor. With the bonus, union made EVs would quality for $12,500 in rebates would apply at point of sale or on tax returns, depending on the consumers preference, according to the bill’s authors.
In addition, after the first five years the consumer subsidies continue for vehicles assembled in the U.S. and rebates would continue to apply. At point of sale or on tax returns, depending on the consumers preference. However, vehicle made overseas in South Korea, Japan, China or Europe would no longer be eligible for the subsidies in five years
Kildee credits attacked by Musk
Kildee’s proposal has been criticized by Toyota and Honda, and by Tesla’s Elon Musk. “This is written by Ford/UAW lobbyists, as they make their electric car in Mexico. Not obvious how this serves American taxpayers,” Musk tweeted.
As the largest seller of electric vehicles in the U.S., Tesla would be a beneficiary of the new round of credits since it has run out of credits to give its buyers under the existing tax law.
Kildee noted in a news release this week several environmental groups, such as League of Conservation Votes, Natural Resources Defense Council Fund and the Sierra Club as well as GM, Ford and Stellantis.