(upbeat music)
- [Narrator] Cars today are far more complex
than ever before.
They need anywhere from several hundred semiconductors
to more than a thousand.
And these chips control everything from the ignition
to the braking system and making sure your seat
is in the perfect position as you drive.
- [Mike Colias] Individual chips,
they're packaged inside these electronic control units.
They, sort of, act as almost, like, separate organs
that have a different function in the human body.
They basically tell the hardware what to do electronically.
- [Narrator] But now auto makers can't source
the semiconductors fast enough
and many cars are sitting in parking lots waiting for chips
because, during the pandemic, chips for vehicles
were diverted to meet a surge in demand for electronics
as people were stuck at home.
And their availability has become tighter also
because of natural disasters that disrupted the supply chain
and the resurgence of COVID cases
in important chip-making regions.
This crunch could cost global auto makers
around $110 billion in revenue this year.
- This crisis has really forced auto makers
to, kind of, rethink both in the short term
and the longterm, how they manage their chips
and their supply chain.
- [Narrator] So, here's how companies
are adjusting their production plants
and what that means the next time you want
to drive a car off the lot.
One of the first solutions
when you don't have enough of something, try to use less.
So some automakers are dropping features that require chips.
- Well, they're, sort of, small add-on features,
I think people have been willing to overlook that.
- [Narrator] Some car dealers in the US
said the global auto company STELLANTIS,
which owns Jeep, Ram and other brands,
shipped some pickup trucks
without an Electronic Detection System,
which looks out for blind spots.
In another example,
GM said it was building some full-size pickup trucks
without software that helps manage fuel consumption.
And Elon Musk said that Tesla was removing
the adjustable lumbar support from the front passenger seat
of some vehicles due to major industry wide
supply chain pressure.
- It hasn't been a big hit, sort of, reputationally
or from a market share standpoint
that they've been, kind of, forced to take that step.
- [Narrator] For instance,
STELLANTIS reported more than $89 billion in net revenue
in the first half of this year,
while General Motors had a strong second quarter
with $2.8 billion in net profit.
But auto makers have had to make some tough choices,
like choosing between vehicles.
- [Mike Colias] Car companies are all trying to figure out
what, prioritize what they wanna make
and what can be sacrificed.
- [Narrator] For instance,
General Motors said it's been shifting computer chips
away from its less profitable vehicles
and using them in it's more popular ones.
But even with diverting inventory,
there's no guarantee that there will be enough chips
for the vehicles that have been prioritized.
- [Mike Colias] When they may not have one of the chips
that they need, they'll continue to build those vehicles,
and then they're setting them aside in parking lots
around the factory and waiting for chips to arrive.
- [Narrator] This is what some in the industry called
the build-shy strategy.
- The good part about that strategy is,
that it allows them to keep the factory running,
'cause it's costly to keep turning off
and turning back on your factory.
- [Narrator] But this can mean chipless cars end up sitting
on the lot for an indefinite amount of time.
Ford said that at the end of March,
it had more than 20,000 vehicles parked
and waiting for chips.
- [Mike Colias] GM over the summer,
they said they had 30,000 pickup trucks
at a plant in Missouri.
- [Narrator] While these strategies have helped companies
to keep going in the short term,
it's also forced them to plan for the future
by rethinking the entire process.
- For decades, the auto industry has really, kind of,
perfected this just-in-time model,
where components arrive at the factory
and even right at the assembly line, just as they're needed.
That allows them to lower their inventory costs
and there's a lot of efficiencies that go with that.
- [Narrator] But the chip shortage
has shown this model breaks down during a global crisis
like the pandemic.
- Companies are looking at moving to stockpiling
really crucial computer chips.
There's been direct outreach from, you know, auto executives
to chip suppliers, which, you know,
hadn't been happening in the past.
- [Narrator] And auto companies
not only want more visibility in the supply chain,
but also more direct control.
- Some of the companies have talked
about even getting more involved
in designing their own chips,
designing components to need fewer chips.
I know Ford, specifically, has talked about that.
- This is infrastructure.
- [Narrator] There's also a big push from the US Government
to shore up its own domestic chip making capacity.
The Biden Administration has said it would prioritize
increasing domestic chip manufacturing
by investing roughly $50 billion
toward research and development.
But building new foundries and increasing chip production
will take years.
And that means auto makers will likely continue
to scale back production.
In early September,
GM said it's temporarily idling two main factories
that produce its pickup trucks,
while Ford said it's temporarily halting a production
of its F-150 at its Kansas City factory in Missouri.
Even some of the more chip-ready auto makers like Toyota,
said it would cut production in Japan by 40% in September.
And in the short run,
all this won't be good news for customers.
- There just simply aren't enough cars.
Usually, Americans wanna drive off in a car that day
and that's not happening nearly to the same degree
as it normally has.
(upbeat music)