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Automakers Seek Biden’s Help To Ease Semiconductor Shortage

This article is more than 2 years old.

The auto industry, through its primary lobbying group, has asked for the Biden administration’s help to mitigate a microchip shortage that has already forced extended plant closings and could reduce vehicle production by more than 1 million units this year.  

The Alliance for Auto Innovation wants the U.S. Commerce Department to direct some of its funding in a proposed bill to boost U.S. semiconductors output to specifically help the auto industry, Reuters reported, citing written responses to a government review.

In February President Joe Biden directed several Federal agencies to relieve the semiconductor shortage. It also has requested $37 billion for legislation to quickly increase microchip production in the U.S.

The money is part of the Biden administration’s $2 trillion proposed infrastructure bill called “The American Jobs Plan.”

John Bozzella, chief executive of the Alliance for Auto Innovation, wrote to request that some of the money be used to build new semiconductor capacity that would be dedicated to the auto industry.

The Alliance represents all major automakers that manufacture in the U.S., including General Motors, Ford, Volkswagen, Toyota and Hyundai.

The crisis began when the Covid-19 pandemic disrupted the semiconductor market. Demand for cars and trucks dropped sharply, causing automakers to cut their orders.

But semiconductor demand for makers of laptop computers and data centers soared, so when auto sales rebounded the companies making the chips couldn’t immediately meet automakers’ needs.

Last week Ford announced it would cut production at seven North American assembly plants. Kia Motors is reducing production for two days at its assembly plant in Georgia.

In late March General Motors said it would extend shutdowns at assembly plants in Lansing, Michigan, and Wentzville, Mo., through the weeks of March 29 and April 5.

GM GM has estimated that the chip shortage could reduce its 2021 earnings by between $1.5 billion and $2 billion. Ford said its earnings could take a hit of between $1 billion and $2.5 billion if the shortage lasts through the end of June.

The auto industry isn’t the only sector suffering from the shortage. Samsung Electronics warned last month that the chip shortage is impacting production of everything from smartphones to electric vehicles.

Gina Raimondo, the former government of Rhode Island who is now President Biden’s Secretary of Commerce, said solving the semiconductor shortage is essential for basic research in all forms of technology.

“This is about out-competing China,” Raimondo said last week in an interview with CNBC’s Jim Cramer. “It we act now we will compete with China. There is time to do that, to rebuild, to build in semiconductors in particular, but we have to get to the business of doing it.”

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