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Chip shortage pain to be spread out ‘pretty evenly’: Autoblog Editor-in-Chief

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Greg Migliore, Autoblog Editor-in-Chief, joins Yahoo Finance’s Kristin Myers and Alexis Christoforous to discuss ongoing impacts of the chip shortage as General Motor car prices surge.

Video Transcript

- Let's talk more about how the automakers are getting squeezed from these shortages. We have Greg Migliore, Autoblog's Editor in Chief, here with us now. Greg, great to have you with us, so we see the chip shortages are causing, at least, General Motors to shut down some of its plants. We're seeing some other plants being idled as a result. Curious to know how long you think the automakers really could be feeling the pain from this.

GREG MIGLIORE: Hey, guys. Thanks for having me, and this is really a critical issue for all of the automakers really. It really wasn't a problem, until it, quite frankly, became a problem, which I guess that's a great metaphor for life. But semiconductors, a.k.a. chips, they're the brains of, basically, everything we use to make an automobile work properly. They're in your car. They're in the factories that build your car, and it's just really become quite a complicated situation. Let's put it that way.

They need to resolve it quickly, very quickly to answer your question. In March, Ford said, they were going to build F-150's, which is their bread and butter vehicle, and then partially build them, and set them aside, until they could actually come back and insert some chips, which is really an extraordinary move. Just last weekend, General Motors mentioned that they were going to actually cut shifts. Another big thing, something they don't want to do as we're seeing increased demand for new vehicles as we enter the strong, summer selling season, spring selling season. So what you're seeing are moves that car companies really don't want to have to make on the cusp of what could be a growing economy.

- Greg, are there any particular models? Let's stick with GM for a moment. Any particular models that are going to be directly impacted that, if you were in the market for this particular GM car, you're going to have a tough time getting it in the coming months because of the chip shortage?

GREG MIGLIORE: Well, it's going to hit, I think, across the product line up for many companies, but specifically, the Silverado, which is their pickup truck, a very important vehicle. It's, I believe, the second best selling vehicle for many years in the country, second or third. And it's just something, where, like, a lot of people want new pickup trucks. Again, you know, you start to see the weather gets warmer.

This is traditionally a time of the year when, like, homebuilding, things like that start to see an uptick. So pickup trucks, you see a lot of increased demand, and you might think, hey, a pickup truck is kind of a rugged vehicle. What do you need a chip for? Well, the answer is you need a computer chip or a semiconductor for almost every car, whether it's modulating, like the throttle response to the power train to the infotainment, like a more traditional electronic sense. They're really the brains for everything right now in the automotive industry.

- Now, I'm wondering how much this really affects a person's decision to buy a particular car from a particular company or not. I mean, if you have your heart set on a Silverado, and they tell you, because of this chip shortage, you have to wait six or eight weeks, do you go buy another car or another brand because of it? Or do you hang on and wait? Does this just mean that the companies will still make the sales? They're just going to happen a little bit later.

GREG MIGLIORE: Well, I think what we're going to see is consumers tend to be-- especially in the pickup truck sector, but in general, there tends to be a fair amount of brand loyalty in the industry. So I think consumers are going to be willing to wait, give the automakers some time to sort this out. This is sort of a very granular issue that is, I think, rather difficult for a lot of people to understand, you know? Just prepping for this interview, there's all sorts of terms and phrases that you really have to dig into.

So I think it's one, where just your average consumer can sort of take the tencent tour and say, OK, chip shortage. I got to wait for a little bit, and sort of leave it there. So I think, as long as this doesn't get too protracted, which I don't think it will. I think we're talking months per se, if you will, to get this going, and then, I think, it'll move beyond this and pass.

- So Greg, let's talk cost. How costly could this get for some of those automakers? We saw just even when some workers went on strike, how painful that was for some of these car makers.

So how much of a dent is this going to cause, at least, to these companies bottom line and at all? Could some of these prices get passed on to customers? When they go to purchase a car, are they going to have to start paying up a lot more, because the demand is far exceeding the supply right now?

GREG MIGLIORE: Yeah, that's a great question. And I think to be quite specific, Ford said in March that the company could see an impact on its earnings anywhere from $1 billion to $2.5 billion before income, and taxes, and things like that. That's a huge number, you know?

These are companies that depend on positive cash flow, on making money, on keeping the churn going, you know? So that's a ton of money. I think this could be tremendously expensive.

I think from the consumer standpoint, I don't expect there to be any near-term costs passed along to them. I think this is one of those things that companies sort of deal with on the supply chain side, and you don't see really, like, foundational changes in the cost of a vehicle over something like this right away. Could this chip shortage continue? We could have a problem, but you know, I expect, perhaps, as soon as today, we're going to see some movement from the federal government.

It's definitely a priority. The Biden administration has said that they consider this a matter of national security. I don't expect it's going to be a political football.

I think, really, like, there's car factories in almost every state. Many people, I mean, everybody uses a consumer electronic in some form in their life. Everybody has a mobile phone. I just really feel like you're going to see some movement on this pretty quickly.

- Is this really a US automaker issue or a global automaker issue? And who, if you had a say, is best positioned during this tough time in the auto industry?

GREG MIGLIORE: I think the pain, if you will, is going to be spread out pretty evenly. To get really granular, it does depend on who is your supplier, who's your chip supplier, where are they, where are you sort of in line to get the chips from them. Ford General Motors have been very up front about some of the difficulties they're facing, and I think that's actually been a good move.

Because you want to communicate to investors, you know, hey, there's a reason we might lose $2 billion, and this is why. So I think that's actually a sound strategy to really put that out there, make that clear. But I think it's really an industry wide problem that you're going to see right now.

- All right, Greg Migliore, Autoblog's Editor in Chief, thanks so much for stopping by and giving us all of those details.