The worst crisis for automakers in 50 years has left dealers with little to sell while prices for consumers are rising
The basic problem is the same across the country — a global shortage of computer chips that has forced automakers to cut production, leading to shortages of new and used vehicles. But the predicament feels particularly offensive here, say Detroiters.
“This is a city of the auto industry. There shouldn’t be a shortage of cars,” said Benyam Tesfasion, a taxi driver who was busy taking travelers from the airport to pick up rental cars at locations 10 or 20 miles away. Another feature of his daily trips, he says, is driving past huge parking lots where automakers store newly manufactured cars awaiting a few final chips.
Detroit’s experience shows how profoundly the nearly two-year semiconductor shortage has turned manufacturing on its head — and forced change on one of America’s most popular consumer markets.
“It could be the biggest disruption we’ve seen since the 1970s and the fuel crisis,” said Matt Anderson, transportation historian at the Henry Ford Museum Complex in Dearborn, referring to the turbulent period in which automakers were forced to to produce more fuel. efficient vehicles.
The chip shortage “is something that my successors will certainly study for years to come,” he added.
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Gone are the days when buyers could pop into a dealership and drive home in a cherry red convertible with their favorite appointments. Buying a car today means placing an order and sometimes waiting months for the vehicle to arrive.
Gone are also the days when buyers could rely on finding affordable wheels. According to data provider Cox Automotive, the average US list price for a new car has increased 20 percent over the past two years to $45,975. The average for a used car has increased even further – by 40 percent to $28,012.
These spikes were a major factor in fueling inflation, which hit a 40-year high last month. A new car is increasingly becoming “a luxury product for wealthy people,” said Charlie Chesbrough, senior economist at Cox Automotive. “For a household of $60,000 or $70,000 a year, you can’t afford a new car payment.”
According to the consulting firm AlixPartners, the global auto industry produced 8.2 million fewer vehicles last year than without the chip shortage. And the outlook for 2022 remains bleak, with automakers projected to sell just 14.4 million new cars in the United States, compared with around 17 million in 2019.
A year ago, Chevy dealer Paul Zimmerman had about 700 new cars for sale on his property outside of Detroit. Today he is about 25.
In the past, “a customer might look at a black blazer or a silver blazer. A white one. One without a sunroof. One with a sunroof. Now there are hardly any left,” said Zimmermann, who bought into the car dealership in February 2020. “So there’s really no way to shop in person.”
That changed everything about the operation of the dealership called George Matick Chevrolet, which opened in 1967 and is one of the largest Chevy showrooms in the United States by square foot.
Instead of stopping by to browse available vehicles, customers are now placing orders and sometimes waiting several months for their car to arrive. Instead of working in the showroom, sales reps now spend hours tracking their customers’ vehicles online to see when they leave production and are available for pickup.
On a recent Monday morning, the dealership had 183 cars in General Motors’ system that were nearly complete but still had a few final components missing. GM coined a new term for these, Zimmermann said — “build shy” — because they’re built shy of parts.
That changed the process of buying a car, which is often an emotional decision, said Zimmermann.
“There’s still a great desire to have that tactile experience, you know, to touch, to feel, to smell, to take a test drive,” he said. Customers ask, “Do you have a place I can just come and sit in?” Do you have one where I could just ride it? Do you have one where I can just look at it?”
“If that’s not the case,” he said, “I think that prevents some people from actually making the decision.”
The Detroit Pistons have not played at the Palace of Auburn Hills, a suburban arena, since 2017, and the building itself was demolished in 2020. But the lot was occupied by about 2,000 newly built GM trucks on a recent Thursday, including Chevy dealers who said chips were missing. Security forces declined to comment.
Asked about the lot, David Barnas, a GM spokesman, pointed to the company’s recent announcement that the chip shortage and other disruptions had left it with 95,000 unfinished vehicles that it plans to complete and sell to dealers by the end of the year. GM keeps the vehicles “on secure lots” near its factories, Barnas said. In the long term, the company is looking to reduce the number of unique semiconductors it needs to provide a more reliable supply, he added.
Similar fleets of unfinished cars are hidden throughout the Detroit area and beyond. An auto industry executive said he recently saw thousands of trucks parked around a GM factory in Silao, Mexico. A former factory employee informed him that the vehicles were missing chips.
For the past few days, about 50 F-150 trucks with new-vehicle stickers have been on a lot behind a low-rise office park near Ford’s Dearborn headquarters. Security officials told the Washington Post that Ford owned the vehicles and that the parking lot, which can hold about 1,200 cars, was full a few days earlier.
Ford spokesman Said Deep didn’t address questions about those trucks, but said that “the entire industry has been dealing with global commodity issues and chip challenges for more than two years.”
“We continue to work on getting our vehicles to our customers as quickly as possible. … It stays liquid,” he said.
The problem actually affects most car manufacturers. Tesla was the only major company to grow U.S. sales in the first half of 2022 year-over-year, with Honda, Nissan and Volkswagen all down more than 30 percent, according to Cox Automotive, mostly due to supply issues .
The shortages are forcing Detroit-area buyers to compromise — even those who spend their days building cars for a living.
Ahyana Elliott, a factory worker at a Chrysler plant in east Detroit, is looking for a new vehicle. A car enthusiast since childhood, she already owns two Corvettes and a Camaro, but wanted a “winter car” that could handle Michigan snow, she said while working at Bob Maxey Ford, a downtown dealership near Detroit River, rummaged for vehicles.
“My dad said, ‘Never have a reason why you can’t come to work. If one car won’t start, get another,'” said Elliott, who spends her free time meeting other car enthusiasts at the local Corvette Club.
She had her sights set on a new Ford Bronco but heard the wait could be a year or more. So now she’s looking at used cars instead, but the high prices and rising interest rates are giving her sticker shock. There isn’t much choice when it comes to dealer properties either.
“It’s terrible. There’s nothing available,” she said.
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At a Chevy dealership in the Auburn Hills suburb, Lauren Fisher prepared to buy out the lease on her Equinox SUV instead of trying to buy a new car.
“With the car I’m leasing right now, I have everything I want: leather seats, sunroof, heated seats and steering wheel,” she says. “If I were to rent this again, I guarantee you I won’t find this. I will have it built or it will take forever to get.”
Labor shortages and tight supplies of materials other than chips are also hampering production at automakers and parts suppliers, but chips are the most persistent problem, say industry leaders.
When an automaker is missing a piece of the puzzle, it can suddenly halt production and force dozens of suppliers to shut down their plants, leaving everyone frustrated, said Thomas Kowal, president of Seraph, a global consulting firm with offices in Troy, Michigan, that was involved , car manufacturers and suppliers to advise on how to overcome the bottlenecks.
An automaker might suddenly say to its suppliers, “Hey, we don’t have to run production on Friday,” Kowal said. Then, on Saturday, it could require suppliers to hire their workers to produce parts over the weekend. “It’s like a yo-yo all the time,” Kowal said.
Uber driver Ljupco Stefanovski, who used to work as a doorman at a Chrysler plant, said he saw the disruption while driving Ford workers to and from their shifts at a Wayne factory. Sometimes when he picks them up they say they will be sent home earlier. “There’s no chip, no work,” they tell him.
Some car managers also bend over chips. “A few months ago I drive a guy — he worked for Ford, he worked for Kia, Hyundai,” recalled Stefanovski, who immigrated to the United States from North Macedonia. “He said, ‘Why don’t we build [chip] Factories here, so we won’t have that problem?’ ”
Stefanovski rents his car through an Uber program because he can’t afford to buy one.
“You can’t even think about buying the car anymore – even used cars are up 40 percent,” he said. “In these two or three years everything is backwards. It’s not the same anymore.”