PRESS EDITORIAL: The fallout from an epic supply failure

An important segment of local business in Ozaukee County is being left behind by the surging economic recovery. Car dealers are selling few new vehicles, with sales totals showing a drastic fall from the pre-pandemic year of 2019.

Their plight is evident in the state of their lots: Crowded with scores or hundreds of cars and trucks in normal times, they are now virtually empty. Dealers do not have cars to sell because automakers cannot supply them.

It is beyond strange to see one of the pillars of the world’s most powerful economy, the auto industry, suffering because the components needed to produce their product are unavailable, but that is the disturbing reality.

The shortage of semiconductor chips needed  for modern vehicles to function—500 to 1,500 for each car or truck—is crippling the industry. General Motors is forecasting a loss of $2 billion in earnings due to the chip shortage. Other automakers are facing their own depressing numbers, as are their dealers in communities across the country.

The automotive sector of the economy, from the billion-dollar corporations that build vehicles to the dealership stores, large and small, that sell them, is paying a price for the chaotic trade policy of the Trump administration. Disruption of supply chains in the pandemic and unexpected demand for all products dependant on chips exacerbated the shortage, but economic analysts blame Trump tariffs for making the chip situation much worse.

Tariffs aimed at injuring the economy of China ricocheted and wounded American business. China cut its sales of semiconductors to the U.S. and sold the chips to other buyers, taking international business away from American chip makers. With sales depleted, the U.S. semiconductor industry cut back production and was not prepared to help meet resurgent demand.

The painful irony of the auto industry’s problem is that its product supply is failing at the very time demand is skyrocketing. Americans are ready, willing and able to spend their pandemic savings on the new cars and trucks that now can’t be built.

A bright side of these otherwise depressing economic circumstances is that the fastest growing part of the demand is for highly fuel efficient vehicles. Of the vehicles that were able to be produced and sold in the first half of 2021, hybrid car sales were up 142% from the previous year. Hybrid vehicles improve fuel economy by augmenting gasoline-burning engines with electric power from batteries.

The Environmental Protection Agency’s latest automotive report found that 2019 hybrid cars achieve 42 miles per gallon of gas, compared to 29 mpg for non-hybrids.

Ken Gillingham, professor of environmental economics at Yale University, explained how hybrids help in the battle to slow global warming:

“For every 100,000 miles driven, hybrids save about 1,000 gallons of gasoline, and the release of roughly 9.8 tons of the greenhouse-gas carbon dioxide is averted. Over the life spans of the hundreds of thousands of hybrids sold in that model year alone, emissions could be reduced by millions of tons.”

The trend of hybrid vehicle acceptance is an encouraging sign that a growing segment of the public understands the impact of fossil fuel burning on the climate and the life it supports in spite of damaging political moves to dismiss it, such as the rollback of EPA fuel efficiency requirements by the past administration. Those mpg mandates have been restored by the Biden administration and bolstered by an executive order requiring 50% of new passenger cars to be hybrids and electric vehicles by 2030.

Carmakers need the push by government regulators and consumers to hasten the transition to environmentally safe vehicles, but once motivated, they are showing they can deliver. Hybrids are offered by all major auto companies, and a variety of all-electric vehicles is fast coming to the mainstream market.

A remarkable measure of progress is the fact that one of the new plug-in electric vehicles most highly praised by auto experts and critics for its performance and relatively low price is made by the American company that invented mass-production fossil fuel-powered cars. The company is Ford and the vehicle is the electric version of the iconic Mustang.

Manufacturers have developed vehicles suited for the evolution to gasoline-free transportation and willing buyers are waiting—if only the cars could be built.

Only when dealer lots are again brimming with the shiny sheet metal of new vehicles will it be safe to assume that the disastrous shortage of semiconductor chips is no longer a drag on the recovering economy.

Feedback:

Click Here to Send a Letter to the Editor

Ozaukee Press

Wisconsin’s largest paid circulation community weekly newspaper. Serving Port Washington, Saukville, Grafton, Fredonia, Belgium, as well as Ozaukee County government. Locally owned and printed in Port Washington, Wisconsin.

125 E. Main St.
Port Washington, WI 53074
(262) 284-3494
 

CONNECT


User login