Computer chip shortage hits Detroit
The worst crisis for carmakers in 50 years has left dealers with little to sell as prices rise for consumers
The root problem is the same across the country — a global shortage of computer chips that has forced automakers to cut production, causing a shortage of new and used vehicles. But the difficulty feels particularly offensive here, Detroiters say.
“This is a car manufacturing town. There shouldn’t be a shortage of cars,” said Benyam Tesfasion, a taxi driver who has been busy transporting travelers from the airport to pick up rental cars at locations 10 or 20 miles away. Another feature of his daily travels, he says , is to drive past giant parking lots where car manufacturers stock up on newly produced cars that are still waiting for a few last chips.
Detroit’s experience shows how thoroughly the nearly two-year-old semiconductor shortage has bolstered production — and prompted changes in one of America’s most beloved consumer markets.
“It may be the biggest disruption we’ve seen since the 1970s and the fuel crisis,” said Matt Anderson, a transportation historian at the Henry Ford Museum Complex in Dearborn, referring to the tumultuous period that forced auto companies to make more fuel. efficient vehicles.
The chip shortage “is the kind of thing that my followers are sure I will be studying for years to come,” he added.
Gone are the days when buyers could pop into a dealership and drive home in a cherry red convertible packed with their favorite features. Buying a car now means placing an order and waiting, sometimes for months, for the vehicle to arrive.
Also gone are the days when buyers could rely on finding affordable wheels. The average US list price for a new car has risen 20 percent in the past two years, to $45,975, according to data provider Cox Automotive. The average for a used car has risen even more – by 40 percent, to $28,012.
Those spikes have been a major factor fueling inflation, which hit a 40-year high last month. A new car is increasingly “a luxury product for wealthy people,” said Charlie Chesbrough, senior economist at Cox Automotive. “For a $60,000 or $70,000-a-year household, you can’t afford a new car payment.”
The global auto industry produced 8.2 million fewer vehicles last year than it would have without the chip shortage, according to consulting firm AlixPartners. And the outlook for 2022 remains bleak, with automakers projected to sell just 14.4 million new cars in the U.S., down from roughly 17 million in 2019.
A year ago, Chevy dealer Paul Zimmermann had about 700 new cars for sale on his lot just outside Detroit. Today he has around 25.
Before, “if you were a customer, you could look at a black blazer or a silver blazer. A white one. One without a sunroof. One with a sunroof. Now there are hardly any,” said Zimmermann, who bought into the dealership in February 2020. “So there is really no opportunity to act in person.“
That has changed everything about the operation of the dealership, called George Matick Chevrolet, which opened in 1967 and ranks among the largest Chevy showrooms by square footage in the United States.
Instead of stopping by to browse available vehicles, customers now place orders and wait, sometimes for months, for their cars to arrive. Instead of working on the showroom floor, salespeople now spend hours tracking customers’ vehicles online, searching to see when they go out of production and become available for pickup.
On a recent Monday morning, the dealership had 183 cars in General Motors’ system that were nearly complete but still missing some final components. GM has coined a new term for these, Zimmermann said — “build shy” — because they’re built shy of parts.
It has changed the process of buying a car, which is often an emotional decision, Zimmermann said.
“There’s still a lot of desire to have that tactile experience, you know, to touch, feel, smell, test drive,” he said. Customers ask, “Do you have one where I can just come and sit in it? Do you have one where I can just take it for a drive? Do you have one where I can just look at it?”
“In the absence of that,” he said, “I think it prevents anybody from actually making the decision.”
The Detroit Pistons haven’t played at the Palace of Auburn Hills, a suburban arena, since 2017, and the building itself was demolished in 2020. But the parking lot on a recent Thursday was occupied by roughly 2,000 newly built GM trucks, which Chevy dealers said were missing chips. Security guards declined to comment.
Asked about the lot, David Barnas, a GM spokesman, pointed to the company’s recent announcement that the chip shortage and other disruptions had left 95,000 unfinished vehicles, which it aims to complete and sell to dealers by the end of the year. GM keeps the vehicles “in secure lots” near its factories, Barnas said. In the long term, the company is trying to reduce the number of unique semiconductors it needs to ensure more reliable supplies, he added.
Similar fleets of unfinished cars are hidden around the Detroit area and beyond. An auto industry executive said he recently saw thousands of trucks parked around a GM plant in Silao, Mexico. A former factory employee told him the vehicles were missing chips.
For the past few days, a lot behind a low-rise office park near Ford headquarters in Dearborn has held about 50 F-150 trucks with new vehicle stickers. Security guards told The Washington Post that Ford owned the vehicles and that the lot, which can hold about 1,200 cars, had been full a few days earlier.
Ford spokesman Said Deep did not address questions about those trucks, but said “the entire industry has been dealing with global raw material issues and chip challenges for more than two years.”
“We continue to work to get our vehicles to our customers as quickly as we can. … It remains fluid,” he said.
The problem actually affects most car manufacturers. Tesla was the only major company to increase U.S. sales year-over-year in the first half of 2022, with Honda, Nissan and Volkswagen all suffering declines of more than 30 percent, largely due to supply issues, according to Cox Automotive.
The shortage is forcing Detroit-area buyers to make compromises — even those who spend their days building cars for a living.
Ahyana Elliott, a factory worker at a Chrysler plant on Detroit’s east side, is in the market for a new vehicle. A car enthusiast since childhood, she already owns two Corvettes and a Camaro, but wanted a “winter car” that can handle the Michigan snow, she said while browsing vehicles at Bob Maxey Ford, a downtown dealership near the Detroit River .
“My dad said, ‘Never have a reason why you can’t come to work. If one car won’t start, have another,” said Elliott, who spends his free time meeting other car enthusiasts at the local Corvette Club.
She was aiming for a new Ford Bronco, but heard the wait could be a year or more. So she’s now looking at used cars instead, but the high prices and rising interest rates are giving her sticker shock. There is also not much choice on dealer lots.
“It’s terrible. There’s nothing available,” she says.
At a Chevy dealership in suburban Auburn Hills, Lauren Fisher was getting ready to buy out the lease on her Equinox SUV instead of trying to get a new car.
“With the car that I’m leasing right now, I got everything I want: leather seats, sunroof, heated seats and steering wheel,” she said. “If I were to lease it again, I guarantee you I won’t find it. I will build it or it will take ages to get it.“
Labor shortages and scarce supplies of materials other than chips are also stalling production at automakers and suppliers, but chips are the most stubborn problem, industry leaders say.
When an automaker is missing one piece of the puzzle, it can suddenly halt production and force dozens of suppliers to idle their factories, leaving everyone frustrated, said Thomas Kowal, president of Seraph, a global consulting firm with offices in Troy, Mich. . has been busy advising car manufacturers and suppliers on how to navigate the shortage.
An automaker can suddenly tell suppliers, “Hey, we don’t need to run production on Friday,” Kowal said. So on Saturday, it may require suppliers to pull in their workers to get parts over the weekend. “It’s like it’s a yo-yo, constantly,” Kowal said.
Uber driver Ljupco Stefanovski, who used to work as a porter at a Chrysler plant, said he’s seen this disruption when he drives Ford workers to and from their shifts at a factory in Wayne. Sometimes when he picks them up they say they are being sent home early. “It’s no chip, no work,” they tell him.
Some photographers also pay attention to chips. “A couple of months ago, I was driving a guy — he worked for Ford, he worked for Kia, Hyundai,” recalled Stefanovski, who immigrated to the United States from North Macedonia. “He said, ‘Why don’t we build [chip] factories here so we won’t have that problem? “
Stefanovski rents his car through an Uber program, because he can’t afford to buy one.
“You can’t even think about buying the car anymore – even the used car goes up 40 percent,” he said. “These two, three years are all backwards. It’s not the same anymore.”
