Crain's Detroit Business: John Taylor on current, future problems facing auto industry
The auto industry feared total collapse when the coronavirus pandemic put a halt to production and tanking vehicle sales brought on flashbacks to the Great Recession. Over the course of just a year, though, the problem has reversed. Automakers cannot make new cars fast enough. The reason why is that the industry is now grappling with a $110 billion dilemma the size of a fingernail. That's the estimated global revenue that will be lost this year due to the ongoing shortage of semiconductors, according to a recent analysis by Southfield-based AlixPartners. A single car part can use up to 1,000 of the tiny computer chips, which are also used in cellphones and other everyday electronics in hot demand during the pandemic. As a result of the supply shortage, new car production is expected to be cut by 4 million units this year, leaving automakers and suppliers reeling. Ford Motor Co., which has been hit particularly hard, said it expects to lose half of its production for the second quarter. While the fractured supply chain poses daunting challenges to profitability, the consensus is that it beats the alternative of a sustained economic recession, which most experts now are not expecting. "Despite all the dire predictions, there seem to be some signs of improvement," said John Taylor, chair of the department of marketing and supply chain management at Wayne State University. While Detroit remains the "mecca of automotive," local automakers and suppliers would be wise to sharpen their focus on the much larger, existential challenge looming ahead, Taylor said. That is the race for dominance in the electric and autonomous vehicle space, which many observers would argue Silicon Valley is winning.