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Auto dealers call chip shortage 'a hell of a follow up' to pandemic; issue spans across industries

Posted at 7:57 AM, May 07, 2021
and last updated 2021-05-07 07:57:31-04

DETROIT — The global chip shortage will cost billions. Everybody from the shop floor assembly line to the showroom floor is adjusting.

WXYZ helicopter video from this week captured rows of pickup trucks and SUVs sitting in the lot of the Flat Rock Assembly Plant. It's called a "build shy," the term in the industry is in regards to building autos to the point where they need chips, set them aside until the chips come in and they can be finished off.

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The other big way to cope is to shutdown production on a temporary or rolling basis, happening with all the automakers in several states. It’s going to continue for weeks.

"We have said we think Q2 is going to be the weakest," said General Motors CEO Mary Barra. "And then we see recovery coming in Q3 and Q4 and that’s based on all the work the team is doing working with suppliers."

The new business climate is good and bad out where the cars are sold.

"We thought COVID would be a challenge," said Mike Boguth, VP and dealer operator with Hamilton Chevrolet Warren. "But this is a hell of a follow up."

First, the bad news: the shortage. "Our supply is down 50 to 60 percent," he said.

The hot selling pickups and SUVs go first, so people are settling for what is available.

The other option is to buy used. This market is even hotter. The reduced supply has driven prices higher than they’ve been in decades.

Get this: In the wholesale market, auto auction prices are too high for the dealers to get stock for their own lots.

The discussion turns to the shortage of chips and why. Much of that production was moved overseas years ago for cheaper labor.

Bill Golling, who owns seven car stores in metro Detroit, says at his Chrysler store his new car stock has gone from 1,200 units on average to 246 today.

He says people who order a new car will get it before waiting on dealer orders to come in.

Something to think about.

The chip shortage also means a shortage of consumer devices and home appliances. When they do come in, they go fast. "Nothing sits. They fly out," said Anthony Skolas of Sargent Appliance. "It’s almost like the public gets a whiff of what we do get, and then they fly in and take it, which we’re not mad about by any means."

The Sargent Appliance store in Macomb Township looks well stocked. But the smart appliances with computer chips are in short supply. That includes microwave ovens, ranges, washing machines, and dishwashers.

Customers are often left with waiting months or giving in.

"We’re back to that whole 'settling' factor: We’re having to settle with things we normally wouldn't settle with," said Skolas.

During the year of COVID, people are spending more time at home and they’re are looking to remodel and upgrade. Customers hear there’s a shortage, and in the store it is real. "One of the shocking things was pretty any appliance we were looking at -- fridge, range, dishwasher -- it’s going to be anywhere from two months to four months for different manufacturers," said appliance shopper Joe Malak.

And with supply low and demand high, the rising cost of materials, the cost of transportation going up, there’s sticker shock.

Goldman Sachs | A Semi-Troubling Shortage by WXYZ-TV Channel 7 Detroit on Scribd

"So, the frustration is not only shelling out the money to pay for expensive appliances, but now waiting," said another shopper.

The chip shortage is having the same effect on all consumer goods, including video games, computers, smart phones, video doorbells, you name it.

Again, there’s that settling factor. People are buying what’s available.

This is a new way of doing business for all of us, changing our thinking. And it is expected to continue for several more weeks.