AlixPartners Describe Auto Reality

The consulting firm couldn’t be much more clear

By Gary S. Vasilash

“Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the COVID-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.

Certainly, that was the case. The chip crisis continues to make the forecourts of new vehicle dealership look like basketball courts: empty.

The comment about the COVID-19 lockdowns in Malaysia is a bit surprising.

Who knew that Malaysia had a role to play in the production of a crossover in Michigan?

Keep that in mind when people talk about (1) supply chains and (2) how there is truly a global network in goods. Those chains are long and those networks are complex.

AlixPartners’ Wakefiled continued:

“Also, chips are just one of a multitude of extraordinary disruptions the industry is facing—including everything from resin and steel shortages to labor shortages. There’s no room for error for automakers and suppliers right now; they need to calculate every alternative and make sure they’re undertaking only the best options.”

That’s resin as in the stuff used to make all of those plastic components that are part and parcel of vehicles. Steel shortages that are driving up the price of this ferrous material (shortages are contributing to rising sticker prices; no surprise there). And labor shortages just aren’t affecting that local restaurant down the street. Seems like workers everywhere have disappeared like that scene in the Marvel movie when the bad guy snapped his fingers.

As for the best options: Seems like OEMs are producing the high-ticket vehicles so as to maximize their venue potential.

A question, however, is whether this isn’t going to have some problems down the proverbial road assuming that the supply chain and network problems are resolved and there are people sitting there with exceedingly expensive vehicles in their driveways and exceedingly long payment schedules for said vehicles.