Global computer chip shortage negatively impacts local car dealerships

Local News

LANSING, Mich. (WLNS)—A global computer chip shortage has played a major role in production within the United States.

The chips are known as semiconductors, and they play a key component in most technical devices controlling navigation devices, rear mirrors, and other important functions in vehicles. Semiconductors also play a major role in iPhones and laptops. However, the global shortage of this product has become a major problem for car dealerships, repair shops, and auto-part suppliers in Michigan.

“47 percent of the market is the U.S. but very small production happens in the United States,” said Anand Nair, PHD, Michigan State University Eli Broad Endowed Professor of Supply Chain Management Department.

Dr. Anand Nair specializes in supply chain management states only 12 percent of chip production happens in the United States, and our economy heavily relies on foreign supply chain to create semiconductors. However, the shortage of the computer chips plays a domino effect on the car industry within the United States.

“The cars typically require chips for some of the more electronically driven activities—we currently might have in the car navigation whether it’s the smart rear view mirrors,” Nair said, “or some of the engine systems some of these things are essentially being run by chips.”

The COVID-19 pandemic impacted all forms of society, and many people started to work from home and avoided public transportation. The sales on cars and electronics during the pandemic has splurged, and Nair states that could be one of the major causes to the initial computer chip shortage. Nair stated other issues that led up to the computer chip shortage are production planning issues, the way industries are set-up, and the market supply.

“Some of these companies are triaging in other words they are trying to allocate these chips to certain models where they get most revenues most profits,” Nair stated, “and not necessarily put them in those chips that used to have them but now they won’t because they won’t necessarily get the profit margins.”

The General Motors Grand River Assembly Plant will remain closed until June 28th amid the shortage of semiconductors; meanwhile, other auto plants have closed their doors around Michigan. Although, new cars are highly impacted by the computer chip shortage—local auto repair shops like, “Joes Body Shop” in Lansing have felt a domino effect from the shortage.

“The front end parts and we had jobs waiting for a couple of months wanting to come in but we just couldn’t get the parts,” said John Audia, The Production Manager For Joe’s Body Shop,”we’re not immune to economic downturns so if something like that is to happen and it keeps going you know it’s going to hurt people selling cars and everything and if there car gets damaged they may be short on money can’t afford their deductibles.”

Dr. Nair predicts the global chip shortage will last until 2022.

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