Car shortages putting dents in some national economies
Turmoil in the auto industry, a powerful engine of the global economy, is threatening growth and sending tremors through companies and communities that depend on carmakers for money and jobs.
For every car or truck that does not roll off an assembly line in Detroit, Stuttgart or Shanghai, jobs are in jeopardy. They may be miners digging ore for steel in Finland, workers molding tires in Thailand, or Volkswagen employees in Slovakia installing instrument panels in SUVs. Their livelihoods are at the mercy of supply shortages and shipping chokeholds that are forcing factories to curtail production.
The auto industry accounts for about 3% of global economic output, and in carmaking countries like Germany, Mexico, Japan or South Korea, or states like Michigan, the percentage is much higher. A slowdown in automaking can leave scars that take years to recover from.
The shock waves from the semiconductor crisis, which is forcing virtually all carmakers to eliminate shifts or temporarily shut down assembly lines, could be strong enough to push some countries into recession.
In Japan, home of Toyota and Nissan, parts shortages caused exports to fall by 46% in September compared with a year earlier.
“It’s a very meaningful drag on growth and employment,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Carmakers have been able to blunt some of the sting by raising prices, passing on some of the pain to car buyers.
The pain is falling hardest on anyone in need of an affordable car. Auto companies have been allocating scarce chips to vehicles that generate the most profit, leading to long waits for less expensive vehicles. Used car prices are skyrocketing because of the lack of new cars.
Vehicles with high profit margins like Ford F-150 or Chevy Silverado pickups “are continuing to get pumped out,” said Ram Kidambi, a partner at consulting firm Kearney who is based in Detroit.
In Eisenach, Germany, a city of 42,000, Opel builds a compact SUV called the Grandland. But Stellantis, which also owns Opel, shut down the factory in October and doesn’t plan to restart production until next year. Workers are fearful that the shutdown could be permanent; Stellantis also produces the Grandland at a factory in France that continues to operate.
The roughly 2,000 people who work at the Eisenach factory or adjacent suppliers are on paid furlough.
There is no sign the crisis will end soon.
Semiconductor-makers have promised to increase supply, but building new factories takes years and car companies are not necessarily the most important customers.
“Semiconductor manufacturers are going to give priority to the Apples and HPs of the world,” said Gad Allon, a professor at the Wharton School, “not a Ford.”