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  • (upbeat music)

  • - [Narrator] Cars today are far more complex

  • than ever before.

  • They need anywhere from several hundred semiconductors

  • to more than a thousand.

  • And these chips control everything from the ignition

  • to the braking system and making sure your seat

  • is in the perfect position as you drive.

  • - [Mike Colias] Individual chips,

  • they're packaged inside these electronic control units.

  • They, sort of, act as almost, like, separate organs

  • that have a different function in the human body.

  • They basically tell the hardware what to do electronically.

  • - [Narrator] But now auto makers can't source

  • the semiconductors fast enough

  • and many cars are sitting in parking lots waiting for chips

  • because, during the pandemic, chips for vehicles

  • were diverted to meet a surge in demand for electronics

  • as people were stuck at home.

  • And their availability has become tighter also

  • because of natural disasters that disrupted the supply chain

  • and the resurgence of COVID cases

  • in important chip-making regions.

  • This crunch could cost global auto makers

  • around $110 billion in revenue this year.

  • - This crisis has really forced auto makers

  • to, kind of, rethink both in the short term

  • and the longterm, how they manage their chips

  • and their supply chain.

  • - [Narrator] So, here's how companies

  • are adjusting their production plants

  • and what that means the next time you want

  • to drive a car off the lot.

  • One of the first solutions

  • when you don't have enough of something, try to use less.

  • So some automakers are dropping features that require chips.

  • - Well, they're, sort of, small add-on features,

  • I think people have been willing to overlook that.

  • - [Narrator] Some car dealers in the US

  • said the global auto company STELLANTIS,

  • which owns Jeep, Ram and other brands,

  • shipped some pickup trucks

  • without an Electronic Detection System,

  • which looks out for blind spots.

  • In another example,

  • GM said it was building some full-size pickup trucks

  • without software that helps manage fuel consumption.

  • And Elon Musk said that Tesla was removing

  • the adjustable lumbar support from the front passenger seat

  • of some vehicles due to major industry wide

  • supply chain pressure.

  • - It hasn't been a big hit, sort of, reputationally

  • or from a market share standpoint

  • that they've been, kind of, forced to take that step.

  • - [Narrator] For instance,

  • STELLANTIS reported more than $89 billion in net revenue

  • in the first half of this year,

  • while General Motors had a strong second quarter

  • with $2.8 billion in net profit.

  • But auto makers have had to make some tough choices,

  • like choosing between vehicles.

  • - [Mike Colias] Car companies are all trying to figure out

  • what, prioritize what they wanna make

  • and what can be sacrificed.

  • - [Narrator] For instance,

  • General Motors said it's been shifting computer chips

  • away from its less profitable vehicles

  • and using them in it's more popular ones.

  • But even with diverting inventory,

  • there's no guarantee that there will be enough chips

  • for the vehicles that have been prioritized.

  • - [Mike Colias] When they may not have one of the chips

  • that they need, they'll continue to build those vehicles,

  • and then they're setting them aside in parking lots

  • around the factory and waiting for chips to arrive.

  • - [Narrator] This is what some in the industry called

  • the build-shy strategy.

  • - The good part about that strategy is,

  • that it allows them to keep the factory running,

  • 'cause it's costly to keep turning off

  • and turning back on your factory.

  • - [Narrator] But this can mean chipless cars end up sitting

  • on the lot for an indefinite amount of time.

  • Ford said that at the end of March,

  • it had more than 20,000 vehicles parked

  • and waiting for chips.

  • - [Mike Colias] GM over the summer,

  • they said they had 30,000 pickup trucks

  • at a plant in Missouri.

  • - [Narrator] While these strategies have helped companies

  • to keep going in the short term,

  • it's also forced them to plan for the future

  • by rethinking the entire process.

  • - For decades, the auto industry has really, kind of,

  • perfected this just-in-time model,

  • where components arrive at the factory

  • and even right at the assembly line, just as they're needed.

  • That allows them to lower their inventory costs

  • and there's a lot of efficiencies that go with that.

  • - [Narrator] But the chip shortage

  • has shown this model breaks down during a global crisis

  • like the pandemic.

  • - Companies are looking at moving to stockpiling

  • really crucial computer chips.

  • There's been direct outreach from, you know, auto executives

  • to chip suppliers, which, you know,

  • hadn't been happening in the past.

  • - [Narrator] And auto companies

  • not only want more visibility in the supply chain,

  • but also more direct control.

  • - Some of the companies have talked

  • about even getting more involved

  • in designing their own chips,

  • designing components to need fewer chips.

  • I know Ford, specifically, has talked about that.

  • - This is infrastructure.

  • - [Narrator] There's also a big push from the US Government

  • to shore up its own domestic chip making capacity.

  • The Biden Administration has said it would prioritize

  • increasing domestic chip manufacturing

  • by investing roughly $50 billion

  • toward research and development.

  • But building new foundries and increasing chip production

  • will take years.

  • And that means auto makers will likely continue

  • to scale back production.

  • In early September,

  • GM said it's temporarily idling two main factories

  • that produce its pickup trucks,

  • while Ford said it's temporarily halting a production

  • of its F-150 at its Kansas City factory in Missouri.

  • Even some of the more chip-ready auto makers like Toyota,

  • said it would cut production in Japan by 40% in September.

  • And in the short run,

  • all this won't be good news for customers.

  • - There just simply aren't enough cars.

  • Usually, Americans wanna drive off in a car that day

  • and that's not happening nearly to the same degree

  • as it normally has.

  • (upbeat music)

(upbeat music)

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B1 US WSJ narrator auto chip factory pickup

How the Chip Shortage Is Forcing Auto Makers to Adapt | WSJ

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    joey joey posted on 2021/09/18
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