28 Mar TOM CONWAY – America’s Supply Chain Crisis
Brad Greve knew it was just a matter of time before the computer chip shortage disrupting the auto industry had a ripple effect on aluminum manufacturing in Iowa.
Greve and his colleagues at Arconic’s Davenport Works—members of United Steelworkers (USW) Local 105—supply the Ford F-150 pickup and other vehicles.
Automakers forced to cut production because of the semiconductor crunch scaled back the amount of aluminum they take from the facility, just as Greve expected, posing another potential setback to a plant already fighting to rebound from the COVID-19 recession.
America cannot afford to jeopardize major industries for want of parts.
The nation’s prosperity depends on ensuring the ready availability of all of the raw materials and components that go into the products essential for crises and daily life.
That will mean ramping up domestic production of the semiconductors—now made largely overseas—that serve as the “brains” of automobiles, computers, cell phones, communications networks, appliances and life-saving medical equipment.
But it also will require building out supply chains in other industries. For example, America needs to produce titanium sponge for warplanes and satellites, pharmaceutical ingredients for medicines and the bearings that keep elevators and other machinery running.
The failure of just one link in a supply chain—as the semiconductor shortage shows—has the potential to paralyze huge swaths of the economy. That’s why it’s crucial not only to source components on U.S. soil but to incorporate redundancy into supply lines so an industry can survive the loss of a single supplier.
“It’s that ripple effect,” said Greve, president of Local 105, recalling the time when a fire at a die-cast parts supplier disrupted production of the F-150. “If you shut down a car manufacturer—or they can’t get one part—you can affect a whole lot of jobs around the country.”
COVID-19 interrupted computer chip production even as demand for televisions, home computers and other goods soared among consumers locked down in their homes. Now, neither U.S. automakers nor manufacturersof other goods can obtain adequate amounts of the semiconductors they need.
Because of the shortage, carmakers cut shifts and laid off workers. The production cuts come as the nation needs the boost from auto sales—and other items containing semiconductors—to climb out of the recession.
Although the decreased aluminum shipments haven’t resulted in layoffs at Davenport, the automotive supply-chain meltdown couldn’t have come at a worse time. When the pandemic curbed air travel last year, airplane manufacturers cut back on the aluminum they get from Arconic.
“Automotive is what kept us going,” Greve said.
The nation’s share of chip manufacturing capacity fell from 37 percent to 12 percent over the past 30 years. And although demand for chips continues to grow, the U.S. stands to gain only a fraction of the additional capacity currently in the pipeline.
That leaves the country overly reliant on foreign suppliers who can encounter their own production shortfalls, as happened during the pandemic, or who can cut off shipments for political or economic reasons at any time.
“If you’re going to war with somebody, they’re not going to sell you anything,” Greve said, noting dependence on overseas supplies not only threatens the nation’s ability to make cars and other consumer goods but to obtain the chips needed for defense and intelligence purposes.
Although the current crisis centers on semiconductors, neglect of the nation’s manufacturing base decimated America’s capacity to produce parts and components for many other industries.
“It affects everybody,” Libbi Urban, vice president of USW Local 9231, said of hollowed-out supply chains that threaten jobs and access to goods. Because of the semiconductor shortage, automakers now take less of the galvanized steel she and her co-workers make at Cleveland-Cliffs’ New Carlisle, Ind., Works.
Shortages of medical and safety equipment during the pandemic revealed how much manufacturing power the nation let slip away.
But it wasn’t only the finished products, like face masks, America found itself ill-equipped to produce. Makers of hand sanitizer and cleaning products struggled to obtain adequate supplies of the hand pumps and spray triggers made overseas.
“How much time and money are being lost waiting on overseas companies to get products and supplies to the U.S.?” Urban asked.
President Joe Biden took the first step toward rebuilding manufacturing power with an executive order in February requiring immediate reviews of supply chains for the semiconductor, pharmaceutical, electric-battery and rare earth minerals industries as well as longer-term reviews of other sectors.
But after identifying weaknesses, America needs to implement a strategy for restoring supply lines and ensuring long-term resiliency.
That will include direct investment in U.S. manufacturing facilities, such as the $37 billion Biden proposed to ramp up chip production.
It involves strategically using tax incentives to encourage employers to expand operations and invest in new technology. And it means building strong markets for U.S. products, partly through policies that encourage federal contractors and other companies to buy domestic goods.
Besides cutting shifts, Greve noted, automakers have been trying to weather the semiconductor shortage by allocating chips to their most popular models or leaving vehicles partially completed until chips arrive.
GM even eliminated an important feature, an advanced fuel management system, in some models just to save chips and get vehicles to market.
“We shouldn’t have that happen in this country,” Greve said. “If we don’t make the supplies here, then we have no control.”