The Wall Street Journal:
Empty Lots, Angry Customers: Chip Crisis Throws Wrench Into Car Business
Car makers have cut production of 1.2 million vehicles in North America because of a shortage of computer chips, losing sales amid high demand
David Kelleher, president of David Dodge Chrysler Jeep RAM in Glen Mills, Pa., at his depleted lot says the inventory shortage is ‘going to be longer and more difficult than most people think.’
Americans are shopping for cars in near-record numbers, but the world’s computer-chip shortage has left dealers with the fewest offerings in decades.
The market mismatch is driving up prices, and many buyers expecting to drive new cars off the lot have to wait weeks or months for their vehicles to arrive. Some showroom models sell for thousands of dollars over the sticker price.
“We may just be in the greatest new-car market of our existence,” Philadelphia-area car dealer David Kelleher said, “and we’re doing it with no cars.”
He recently woke up at 3:30 a.m. in a cold sweat and scrolled an iPad to check on his inventory of Jeeps and Ram trucks. After posting his best months ever in March and April, Mr. Kelleher was heading into the busy summer sales season with 98 vehicles on his lot instead of the usual 700.
“That really shook me up in a bad way,” he said. “This is going to be longer and more difficult than most people think.”
Auto makers have been forced to cut production of more than 1.2 million vehicles in North America because they can’t get enough chips that are used for everything from safety systems to brakes and engines, research firm AutoForecast Solutions estimated. That has turned car lots into a sea of bare asphalt.
Dealers had fewer than 2 million vehicles on the ground or en route to stores at the end of April, roughly half the normal number and the lowest level in more than three decades, according to research firm Wards Intelligence.
Some General Motors Co. dealers have taken their frustrations straight to Chief Executive Mary Barra. “I’ve got them sending me pictures [showing] that they have virtually nothing on the lot,” the CEO told analysts last week. GM has been in daily contact with dealers about inventory and the company’s plans to make up lost production once the chip shortage subsides, a spokesman said.
Chip makers are set to spend billions on new capacity, and the White House has prioritized increasing domestic chip production, but building new plants will take years. Many auto executives expect the shortage to affect their businesses through the rest of the year.
For now, the lack of computer chips has disrupted production at dozens of auto factories across the U.S., including those that have been closed for months.
Car makers are building some models without needed semiconductors and parking them until chips are available to install. Tens of thousands of these vehicles sit at airport lots, a quarry, a racetrack and other makeshift holding pens near assembly plants in the South and Midwest.
The chip shortage has left factory workers to sit home, watching bills pile up while trying to navigate state unemployment offices stretched thin in the pandemic.
One of them, Danyelle Anderson, is a single mother of four who has worked at Ford’s Chicago assembly plant for three years. She filed for benefits after the Explorer assembly line was idled on April 12. She and other plant workers said it was taking weeks to see their first check.
The delays caused Ms. Anderson to miss her rent and car payments, she said, and her cellphone service has been cut off for money owed. She expects her first check this week. Meantime, she keeps her car in the garage, afraid it could be repossessed while she is in arrears.
“It’s a waiting game and I’m losing,” Ms. Anderson said.