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- Detroit’s auto industry is closely monitoring a potential semiconductor chip crisis stemming from a dispute between the Dutch government and China.
- The Dutch government has suspended its intervention in chipmaker Nexperia as a gesture of goodwill amid “constructive talks” with China.
- Experts say the situation highlights the vulnerability of the auto supply chain, which remains at risk of disruption beyond semiconductors.
Detroit’s auto industry is monitoring the latest developments in the looming semiconductor chip crisis to see if the problem can be resolved and the industry can breathe again, or if it will lead to another shortage of semiconductor chips and halt new car production.
On November 19, the Dutch government announced that it would stop intervening in computer chip maker Neexperia, citing “constructive discussions” with China. The Dutch government has been in a dispute with China for weeks, causing a shortage of chips used by automakers in various car parts.
The dispute stems from the Dutch government taking control of Nexperia on September 30 to prevent the company’s former chief executive from moving his business to China. In response, China suspended all exports of Nexperia’s finished products on October 4th. Since then, China has slightly eased its export suspension measures.
According to Reuters, Dutch Economy Minister Vincent Kallemans said the suspension of government intervention was a sign of goodwill as talks continued.
“We remain positive about the steps the Chinese authorities have already taken to secure chip supplies to Europe and the rest of the world,” he told Reuters in a statement.
This is good news for Detroit automakers and the rest of the auto industry, as many automakers are reportedly setting up “war rooms” to monitor and mitigate the chip shortage to ensure it doesn’t cause major disruptions to new car production.
History of Detroit Chips
The last thing Detroit automakers want is a repeat of the semiconductor chip shortage caused by the coronavirus in 2021. As a result, thousands of unfinished vehicles were left sitting in parking lots across the country, waiting for the chips to be produced and shipped to dealers.
So while news of progress in negotiations between the Dutch and Chinese governments is a welcome respite for the Detroit automaker, it remains cautious.
General Motors spokesman Kevin Kelly told the Detroit Free Press, part of the USA TODAY Network, on Nov. 19: “We are closely monitoring the situation regarding this matter, and our business has not been impacted.”
GM CEO Mary Barra said last month: “While production may be affected, our teams are working around the clock with our supply chain partners to minimize the potential for disruption. The situation is very fluid and we will provide updates as needed throughout the quarter.”
Stellantis Crosstown spokeswoman Jody Tinson said in an update on the situation that Stellantis continues to monitor the situation. “Stellantis continues to develop mitigation strategies to minimize potential disruptions,” Tinson said in an email when asked if the automaker had experienced any production disruptions.
However, Stellantis CEO Antonio Filosa said during a third-quarter earnings call with the press that the company “has a cross-functional ‘war room’ and teams are managing this situation every day.”
Ford Motor Company did not immediately comment on the latest news. However, in a third-quarter earnings call with the press, COO Kumar Galhotra said Ford is working with the U.S. and Chinese governments on a resolution, and CEO Jim Farley visited Washington, D.C., to facilitate a resolution.
“The types of parts that Nexperia makes are fairly common parts, and we have tried to buy these parts from other sources as much as possible,” Galhotra said last month. “We are tracking how much time we have left, how much we were able to purchase, and how long it will take to resolve this situation.”
He said it will be a very close call in terms of maintaining chip supply until a solution is found.
“We think we need a very quick solution to avoid production losses in the fourth quarter,” Galhotra said. “Not just for us, but for the entire industry.”
There are weak links in the automotive supply chain
Last month, Honda became the first automaker to reveal that its production was affected by the chip dispute. Honda has reduced production at all major plants in North America, including heavy vehicle assembly plants and support facilities in the United States, Canada, and Mexico. Volkswagen indicated at the time that it only had about a week’s supply of semiconductor chips left before production was affected.
That’s why the suspension is a small step toward a solution, but still welcome news for the auto industry, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
“With trade tensions currently disrupting global supply chains, any relief is a good sign,” Fiorani told the Detroit Free Press.
But he warned that the incident should serve as a wake-up call to all players in the auto industry that all weaknesses in the supply chain need to be addressed.
“Nexperia is just the latest in a long line of broken links that could bring down automakers, and even the entire industry, instantly,” Fiorani said. “Semiconductors have been in the spotlight for five years now, and while the potential dangers aren’t going away any time soon, chips are just the most obvious component that can cause problems.”
Fiorani said all automakers and suppliers will now need to secure supplies of core materials and chips such as aluminum, steel, cobalt, copper, nickel and lithium.
Jamie L. Lareau is senior auto writer for USA Today and covers Ford Motor Company for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @Jalalean. To sign up for our automotive newsletter. become a subscriber.
