Did you know that cars and trucks are made of about 30,000 individual parts? And a finished vehicle doesn’t get off the shop floor until each of those component parts are in place. “It’s all or nothing,” says one industry CEO. The auto industry is preparing for supply-chain problems from the coronavirus outbreak in China to soon hit vehicle production in the world’s healthiest car market: the U.S., reports The Wall Street Journal (Feb. 29, 2020)
Auto parts made in China generally take several weeks to be shipped via ocean freight to the U.S., a lead time that has so far not had significant impact on U.S. vehicle production. However, with some critical components already in short supply, several car companies and auto-parts suppliers have chartered airplanes or booked space on commercial cargo planes to fly parts directly from China.
Nissan and Toyota are reserving space on commercial cargo planes to ship key electronic parts to their North America plants. Pinch points are even emerging for mechanical parts that have a broader supply base, such as brake pads and door hinges as many auto makers are scrambling to find backup supplies. Tensions over who will cover the cost of airfreight and other added expenses already have escalated, and often lead to months of wrangling between suppliers and auto makers.
Parts shortages already have forced some car factories to close or curb production in Japan and South Korea, and has threatened car output in Europe, where the coronavirus continues to spread. “There is a strong likelihood that there will be disruption of production” at car companies in the U.S. a Detroit exec said. “It will get more serious before it gets better.”
Classroom discussion questions:
- How can manufacturers deal with such shortages in today’s global economy?
- What is happening tp vehicle sales in China?