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Bridge Michigan
Michigan’s nonpartisan, nonprofit news source

Michigan buyers ask: Where are the cars? Microchip shortage decimates inventory.

empty lot
Car dealers statewide like this one in Fowlerville have a unique problem: They don’t have many cars to sell. Some are using the downtime to repave lots (Bridge Michigan photo by Paula Gardner)

If you’re looking for a new vehicle, you might find a dealer lot with many of them. You might even see one that you like.

But as summer wears on, the odds get worse that you’ll be able to buy one.

U.S. auto producers are still feeling the squeeze from an international microchip shortage that emerged at the start of the year and escalated through spring, prompting production slowdowns. That’s leading to frustration throughout the rest of the automotive pipeline, including suppliers, dealers and customers.

 

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An inventory backlog helped to keep the dealers stocked in the early months of the shortage, said Terry Burns, vice president of the Michigan Automobile Dealers Association.

That’s history. Now, “everything is sold on pretty much every lot,” Burns said.

Beyond that, “every dealer is waiting for hundreds (of vehicles) that they’ve ordered,” he said.

Production of microchips — tiny electrical circuits that form the “brain” of electronic systems — stalled due to the pandemic. Complex supply networks of equipment and materials needed to make them were affected by COVID-19, the cancellation of chip orders early in the pandemic and a host of factors as disparate as a fire in Japanese semiconductor plant to spring storms in Texas that halted fabrications.

That created an uneven production cycle just as automakers and consumer electronic companies started to compete for the ones that were available, particularly as consumer demand increased for both products. 

“The global semiconductor shortage remains complex and very fluid,” according to a statement this week from General Motors Corp. 

Departments throughout GM — including engineering and manufacturing teams — have been trying to adapt. Jack Crawley, spokesperson for the Flint Assembly plant, told Bridge Michigan in June that some of the heavy duty trucks produced there had been adapted to use fewer chips. 

But there’s a limit to how many they can eliminate: Microchips direct many of a vehicle’s functions, from the powertrain to infotainment and safety systems.

So far, U.S. buyer demand this year has been high, particularly for trucks,  and sales for most brands are showing yearly increases through July, including Ford (14 percent), GMC (41 percent). Chevrolet (20 percent) and Toyota (43 percent.)

However, the shortage is still affecting production, including at plants in Michigan. 

Workers at Lansing’s Delta Township Assembly plant learned recently that they’ll get an additional week of downtime, with the closure that started on July 19 now planned to last through next week. That factory builds the Chevrolet Traverse and the Buick Enclave.

Both Flint Assembly and the Fort Wayne, Indiana, plants will be closed from Monday until Aug. 16.  Flint builds the Chevrolet Silverado HD and GMC Sierra HD trucks, while Fort Wayne builds the Chevrolet Silverado 1500 and GMC Sierra 1500 models. A third big truck factory in Silao, Mexico, also is affected by this shutdown.

Meanwhile, in another sign that the chip shortage isn’t abating, two additional international GM factories that shut down on July 19 will be closed for two additional weeks: San Luis Potosi Assembly in Mexico and CAMI Assembly in Canada. Those production slowdowns affect the Chevrolet Equinox and GMC Terrain.

GM is “prioritizing semiconductors for our most in-demand products, including full-size trucks and full-size SUVs,” said David Barnas, a GM spokesperson.

The shutdowns, GM said, also will let the company finish the chipless vehicles made but still waiting to be completed and then “ship those units to dealers to help meet the strong customer demand for our products,” the company said.

The dealers can’t wait, Burns said. 

“We really have no inventory,” he said.

Burns said dealers no longer can predict when a car hauler will show up with vehicles they’ve ordered. But when they do, employees are greeting their arrival with applause and cheers, he added.

Every arrival is already sold, in one form or another. 

Some have been promised as incoming inventory to a buyer. Other times, buyers special-order their vehicle, and dealers have no way to predict whether that will be faster to arrive.

So far, Burns said, the situation is “intense,” but dealers are adapting. 

They’re trying to build their used car inventories, where prices are climbing quickly as more buyers turn to previously owned vehicles. 

The average listing price for a used car jumped to $25,000 in June, after crossing $22,000 for the first time in April, according to  Cox Automotive Inc., a research group. (Among some models, used cars are more expensive than new ones because of shortages).

Dealers also are encouraging customers who don’t have to buy vehicles to maintain their existing autos. 

That is keeping repair centers busy, Burns said.

Retaining staff hasn’t been a concern, either, Burns added. Some dealers are using their time with empty lots to repave them, add electrical capacity or do other maintenance that’s more difficult when full inventory.

Burns said Michigan’s 600 auto dealers originally expected that the chip shortage would allow normal production in the second quarter. Now that it’s stretching into the third quarter, they’re hoping the chip shortage will abate by the end of September.

However, GM CEO Mary Barra told reporters this week on a conference call that she expects the situation to be an issue into early 2022, and the automaker warned that profits likely will be affected.

It’s unclear what that means for Michigan’s dealer network, which overwhelmingly remains owned by individuals and not public companies.

“Dealers are some of the most positive people,” Burns said. 

“They’re doing everything they can to be there for their customers. If this thing continues to prolong, other decisions may have to be made.”

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