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

Posted at 7:20 PM, May 06, 2021
and last updated 2021-05-06 19:20:38-04

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

Chopper 7 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.

Related:

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

The Chip Impact

"We have said we think Q2 is going to be the weakest. 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," said General Motors CEO Mary Barra.

Quote by Mary Barra, GM CEO on Chip Shortage

The new business climate is good and bad out where the rubber meets the road, where the cars are sold.

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

Quote by Mike Boguth, VP, Dealer Operator, Hamilton Chevrolet Warren

First, the bad news, the shortage.

"Our supply is down 50 to 60 percent," he said.

The hot-selling pickups and SUVs go first. And 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 auctions the prices are too high for the dealers to get stock for their own lot.

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

What's going on with the chip shortage?

Bill Golling, who owns seven car stores in metro Detroit, says his new car stock has gone at his Chrysler store 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.

Quote by Anthony Skolas of Sargent Appliance

"Nothing sits. They fly out. It’s almost like the public gets a whim of what we do get and then they fly in and take it. Which we’re not mad about by any means," said Anthony Skolas of Sargent Appliance.

The Sargent Appliance store on Hall Road in Macomb Township looks well stocked. The smart appliances with the chips are in short supply. That includes microwave ovens, ranges, washing machines, 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 would 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.

They hear there’s a shortage, and here 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 cost of materials, the cost of transportation going up, there’s more 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, smartphones, 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.