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Transcript/ScriptUSAGM SHARE
((PLAYBOOK SLUG: TV - UKRAINE-AUTO-SUPPLY-CHAIN-WOES
HEADLINE: Ukraine War Adds to Supply Strain in Global Auto Industry
TEASER: Demand for cars is up, but supply is down
PUBLISHED AT: 04/22/2022 at 5:03 pm
BYLINE: Kane Farabaugh
CONTRIBUTOR:
DATELINE: Ottawa, Illinois
VIDEOGRAPHER: Kane Farabaugh
PRODUCER: Kane Farabaugh
SCRIPT EDITORS: cobus, Holly Franko
VIDEO SOURCE (S): VOA, Skype
PLATFORMS (mark with X): WEB __ TV _X_ RADIO __
TRT: 2:48
VID APPROVED BY: Holly Franko
TYPE: TVPKG
EDITOR NOTES:))
((INTRO:))
[[A global shortage of microchips is only a part of the difficulty roiling the global automotive industry. As more drivers return to work as pandemic restrictions ease — increasing demand for new vehicles — inventory is scarce. VOA’s Kane Farabaugh has more from Chicago.]]
((NARRATOR))
By this point in the year, Bill Walsh Jr. hoped to see inventory on the lots of the 27 automotive franchises he oversees back to normal.
((Bill Walsh Jr.))
“We typically have 2,000 vehicles in stock, especially at this time of the year going into the spring. We’re at 600.”
((NARRATOR))
Walsh’s available inventory is down more than 65 percent at a time when demand for vehicles is up. Part of the problem for manufacturers is a shortage of semiconductors or “chips” needed for the electronic systems in most new vehicles. While that shortage stems from a lack of production during the pandemic, Walsh says it’s been compounded by a perfect storm of circumstances since then.
((Bill Walsh Jr.))
“You’ve got labor-shortage problems, you’ve got transportation problems, you’ve got now natural disasters.
((NARRATOR))
A shutdown of the shipping lanes in the Suez Canal for weeks in 2021 is another contributing factor. And now, the war in Ukraine.
((Hani Mahmassani, Northwestern University)) ((Skype))
“Wire harnesses apparently - Ukraine is the one of the most important producers."
((NARRATOR))
Professor Hani Mahmassani is the William A. Patterson distinguished chair in transportation at Northwestern University in Illinois.
((Hani Mahmassani, Northwestern University)) ((Skype))
“Our supply chains have become so globalized and interrelated, that if one sort of spot in there is struggling you are going to see repercussions across the board.”
((NARRATOR))
Mahmassani says the automotive industry spent 20 years trying to optimize supply chains while cutting costs.
((Hani Mahmassani, Northwestern University)) ((Skype))
“We have hyper-optimized supply chains, and that means there is very little slack left. And when you have no slack, you are not able to deal with disruptions very well. And so we’ve designed for low cost essentially and for efficiency, and by doing so, we have lost resilience.”
((NARRATOR))
And money. Avnet Silica, a division of a European company that distributes electronic components, reports that automotive manufacturers lost more than $500 billion in revenue since the start of the pandemic // which has trickled down to dealers like Walsh.
((Bill Walsh Jr.))
“We have seen probably 200 units a month taken out of our total sales.”
((NARRATOR))
Walsh says the manufacturers who supply his dealerships are warning the problems won’t end anytime soon, even as they try to retool supply chains.
((Bill Walsh Jr.))
“Depending on the manufacturer... 2023, 2024, 2025, and don’t ever anticipate having the inventory levels that you had pre-COVID.”
((NARRATOR))
Potential customers wait for inventory, and they will pay more once they find a vehicle they want. Not only are overall prices in the U.S. increasing, so are interest rates for auto loans amid the highest inflation figures in 40 years.
((Kane Farabaugh, VOA News, Ottawa, Illinois))
