The auto industry is currently being left to deal with the impacts of business decisions made in the early days of the pandemic. When plants across North America were idled last year in the name of safety, these companies were forced to cancel orders for a variety of materials used to build cars. Chief among these materials were automotive-grade semiconductor chips. This has proved to be catastrophic, as the manufacturers of those chips transitioned to sell their stock for other uses. With production now grinding to a halt across the country due to semiconductor chip shortages, the auto industry is looking for a lifeline. According to a report from Automotive News, a coalition of automakers called the Alliance for Auto Innovation has asked the federal government for help.
The Alliance for Auto Innovation represents companies such as General Motors, Ford, Volkswagen, Toyota and Hyundai. The group has warned the federal government that as many as 1.68 million fewer vehicles will be built in the U.S. this year as a result of the chip shortage, with impacts extending for at least six more months. In order to prevent this from continuing, the Alliance for Auto Innovation is asking the government to issue a mandate to silicon suppliers. The mandate would require these companies to set aside an agreed upon amount of automotive-grade silicon to help quell the shortage.
The Biden Administration is aware of this issue. In fact, the semiconductor chip supply chain is one of the areas that the President tasked his administration with studying earlier this year. It is quite possible then that we will see the federal government step in to try and alleviate some of the economic stress that automakers are facing. Ford for example is projecting losses in profit of anywhere between $1 billion to $2.5 billion for 2021. Just last week the automaker announced that seven of their production facilities in North America would be impacted by closures and shift cancelations due to the semiconductor chip shortage. Those closures began this week.
If the federal government is able to help get the industry back on track by issuing some terms to silicon manufacturers in the United States, that is something they should probably do. Automakers shut their doors to help keep their employees safe, while silicon companies took advantage of the booming market for personal electronics during the lockdowns. While no one can blame them for this decision, we shouldn’t let it wreck havoc on another important industry.