[Auto] Microprocessor shortage chips away at auto dealers' inventories

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A supply crunch for a physically small device — the microchip — has been posing some big challenges for some automakers’ production in recent months, and several Northern Michigan car and truck dealers are noticing its impacts as they seek to line up inventory.

“We’re really struggling with it, and I think all dealers are,” said Charlevoix Auto co-owner and general manager Bob Seitz, whose dealership carries the Chevrolet, Chrysler, Dodge, Jeep and Ram brands.

As USA Today recently reported, a shortage of microchips — which have played an integral role as cars and trucks’ functions have become increasingly computerized in recent decades — has been affecting several markets since mid-2020.

Amid the COVID-19 pandemic, chip factories began shutting down early last year, particularly overseas, where the majority of the processors are made. By the time they started to reopen, they had a backlog of orders to fill.

Stay-at-home orders drove a surge in consumer electronics sales, squeezing auto parts suppliers who use chips for computers that control gas pedals, transmissions and touch screens. Chipmakers compounded the pressure by adjusting production lines to better serve the consumer electronics market, a far larger revenue source for them than autos.

After eight weeks of pandemic-induced shutdown in spring 2020, automakers started reopening factories earlier than they had envisioned. But then they were hit with unexpected news: chipmakers weren’t able to flip a switch quickly and make the types of processors needed for cars. Some anticipate the recent disruption of traffic along a key international shipping route — resulting from a large cargo vessel becoming stuck for several days in the Suez Canal — could further complicate the flow of microchip supplies.

For auto companies, responses to the shortages have included shift cancellations, temporary factory closures and assembly of some models without installation of certain processors, with those units typically set aside for retrofitting once the needed chips are available.

The production hits came at a time when dealerships such as Charlevoix Auto — which opened last year at a former location of the Fox Motors chain — were seeing rising demand for cars and trucks.

Seitz said the flow of new vehicles to his lot from Stellantis — a company created through the recent merger of automakers Groupe PSA and Fiat-Chrysler, parent of the Chrysler, Dodge, Jeep and Ram brands — hasn’t shown significant disruptions. However, selections of Chevrolet products — particularly for the trucks and full-size SUVS which are traditionally strong sellers at the Charlevoix dealership — have been sparser than usual as of late. At one point in early April, Seitz said the dealership had two new full-size Chevrolet trucks in stock, compared to the dozen or more which likely would be on hand amid typical industry production.

Some automotive observers also have reported signs that the microchip shortage’s impacts also are carrying over to the used car market, as some consumers seek out alternatives to new models in short supply. With demand for previously owned vehicles strong at Charlevoix Auto, “it has been very tough acquiring inventory,” Seitz said.

With used vehicles commanding high prices at auctions recently, Seitz said the dealership has been working to obtain units from local sellers. In one respect, he said the supply situation has been helpful in moving slower-selling inventory along, and added car buyers have tended to be aware of the issues facing the industry and willing to adapt from preferred color and option choices.

“Customers have been super flexible,” he said.

At Subaru By-The-Bay in Bay Shore, owner Ryan Bremmeyr said signs of the supply-chain challenges facing the auto industry are becoming somewhat more visible as spring settles in.

The dealership had an extensive selection of new Subarus available through the first two months of 2021, Bremmeyr said in early April. The choices available to customers have since started to taper off, amid a recent record sales pace for Subrau By-The-Bay and signs of production slowdowns.

Looking toward mid-year, Bremmeyr said his understanding is that Subaru will prioritize available microchip supplies for use in models such as the Outback and Forester in the weeks and months ahead, which should help the dealership in maintaining selections of these po[CENSORED]r lines. For customers seeking lower-volume models, it may not as easy to find one’s first choice of color or trim level.

“If you’re looking for something a little bit different, it’s going to be a little harder to come by,” Bremmeyr said.

Bill Marsh Jr., a partner in the Bill Marsh Auto Group — which operates a Ford outlet in Gaylord as well as dealerships carrying multiple brands in Traverse City and Kalkaska — said the biggest impacts of the industry parts shortage for his business have tended to involve inventories of po[CENSORED]r truck models such as Ford’s F-150 and Ranger.

“It’s not like we have no product,” he said. “We’re just constrained.”

Of the various manufacturers which his dealerships represent, Marsh said Ford inventories seem to have tightened the most amid the trend, followed by those for GM products and to lesser extents, Stellantis and Hyundai.

Marsh said the dealership group is fortunate to have a strong supply chain for used vehicles — including many obtained via trade-in — and said the recent market trends offer a bright spot for drivers looking to swap for a different vehicle.

“People’s trades are worth more than they would be in a normal time,” he said.

At Fletch’s GMC Buick Audi in Petoskey, general sales manager James Skop said the industry’s supply-chain challenges also are showing differing impacts for the lines that dealership carries.

Stocks of GMC full-size trucks and SUVs — which make heavy use of the processors in short supply — have been relatively tight and quick to turn over as of late, Skop said, adding that he’s heard indications that General Motors will be dialing back on production of some other GMC models to prioritize available parts for use in highly profitable lines such as these.

For Fletch’s, inventory impacts for Buick — whose lineup of SUVs is mostly assembled overseas, and tends to involve longer shipping times to dealerships than some other GM products — and the Audi brand have been less noticeable, Skop said.

For vehicles with limited selections, Skop said trading of units between dealers is one method which can sometimes help secure a desired spec for a customer. He added that ordering a vehicle with preferred attributes is another option available, and added that some customers have commonly shown a willingness to adapt to available choices on the lot.

“I think a lot of people are aware of the situations,” he said.