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  • Automakers Killing Deals, Focusing on High-Demand Models

    Automakers are killing deals and focusing production on high-demand models as a result of the semiconductor shortage.

    The automotive industry has been hit with by a shortage of semiconductors. The shortage began during the early days of the pandemic, when production was hit by lockdowns and COVID-19 outbreaks. Most recently, the shortage was exacerbated by an outbreak in Malaysia, impacting a region that supplies automotive semiconductors.

    Virtually every major automaker has been impacted, with companies pausing production or shipping vehicles without their full compliment of chips. Despite the challenges, some companies are seeing upsides, namely the ability to kill deal-making as a result of the high demand caused by decreased production.

    According to Bloomberg, Mark Wakefield, a consultant at AlixPartners, said automakers are making $3,000 more per car, and as much as $10,000 on pickups, SUVS and other lucrative models. Analysts see this as a positive change, a healthy departure from the days of overproducing and selling inventory for barely a profit.

    “It’s a fantastic opportunity,” Wakefield said. “Everyone’s been forced into the cooperation box because of the supply situation.’’

  • White House Wades In As Chip Crisis Poised to Cost Auto Industry $210 Billion

    White House Wades In As Chip Crisis Poised to Cost Auto Industry $210 Billion

    The White House is discussing the ongoing semiconductor crisis with companies as the auto industry is poised to lose $210 billion in revenue.

    The semiconductor crisis has taken a major toll on the auto industry, with manufacturers around the world being impacted. For example, GM recently announced it would shut down most of its American plants as a result of the shortage, and had previously said it would ship some 2021 trucks without their full complement of chips, leading to 1 MPG less than previous models.

    Companies are taking various measures to ease the shortage. Intel has said it will start producing chips for the auto industry, but warned it would take months before its first chips were produced.

    In the meantime, a report from AlixPartners is warning the crisis will cost auto makers $210 billion in revenue in 2021, exacerbated by a COVID-19 outbreak in Malaysia, a main hub for automotive semiconductor manufacturing.

    “Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners. “Also, chips are just one of a multitude of extraordinary disruptions the industry is facing—including everything from resin and steel shortages to labor shortages. There’s no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they’re undertaking only the best options.”

    At the same time, the White House is engaging with companies in an effort to determine what measures can be taken to ease the crisis. According to TheStreet, executives from Apple, Ford, General Motors, Intel, Microsoft and Samsung were expected to attend a meeting at the White House Thursday to discuss the issues.

    Unfortunately, in the short term, there appears to be no quick fixes or easy answers to the problem.