Biden's inflation woes persist with production stoppages at 'Big Three' automakers

Dire signals from the “Big Three” North American automakers present yet another reminder of the current inflationary run facing President Joe Biden, the largest the United States has seen since 2008.

Chrysler, Ford, and General Motors all announced within the past week that semiconductor shortages would force the companies to temporarily halt production. Though the stoppages are expected to only last two weeks, company officials still predicted they would cause prices to rise on the remaining inventory in car lots across the country.

Furthermore, Ford announced that semiconductor shortages and lack of inventory caused car sales to plummet in August, down more than 33% from the same month last year.


Shortages are also causing problems for European manufacturers. Volkswagen CEO Herbert Diess told CNBC the company is currently “relatively weak because of semiconductor shortages.”

“We are hit more in China than the rest of the world,” he said at an interview at the Munich Motor Show on Monday. “That’s why we are losing market share.”

Daimler CEO Ola Kallenius offered similar comments at the same event but was slightly more optimistic that the trend might reverse in Q4 as countries limit the spread of the coronavirus.

“We hope that in the fourth quarter that we will start coming back up again,” he stated. “But there is a level of uncertainty that we have to deal with in our production system. It needs to stay flexible.”

The Associated Press interviewed a number of industry experts in early September who predicted that chip shortages will keep prices high well into 2023. Those predictions fall in line with comments that a supply chain engineer for Intel, the world’s largest chip manufacturer, gave to the Washington Examiner in July. The engineer, who has a high degree of visibility regarding the company’s supply chain discussions, suggested that even with Intel’s efforts to boost production to help automotive companies, they would not be able to scale up supply to meet global demand for one to two years.

“Demand is so high,” the engineer explained. “We’re building this big fab we announced in Arizona. That’s going to add a couple million square feet to our fab there, and we’re constantly building in Oregon. But I think the timeline to be getting new tools on to expand our capacity is a couple of quarters. So, I would say our capacity isn’t probably going to be able to meet customers’ demand for something like a year to two years.”

These new automotive concerns come as a number of Democrats have joined Republicans in voicing inflationary scruples about the Build Back Better budget reconciliation package, Biden’s hallmark “human infrastructure” package worth $3.5 trillion.

The White House did not return the Washington Examiner’s inquiries by publication time, but press secretary Jen Psaki briefly addressed the subject with a gaggle of reporters aboard Air Force One on Tuesday.

“The president also agrees we should take inflation seriously,” she stated in response to a question about West Virginia Democratic Sen. Joe Manchin’s recent op-ed opposing Biden’s infrastructure plans over inflationary fears. “Many outside economists will tell you that these plans will do exactly that: they’ll lower costs for goods for the American people over the long term. So, some of the points that were made in that op-ed are consistent with what our views are and why we’re pushing for this agenda.”

Biden himself also suggested in a national address last week that his infrastructure proposals will “ease inflationary pressure and allow us to win the competition of the 21st century in a global economy where the competition has become more intense.”

“This is long-term prosperity we’re talking about — about lowering the cost of living for families, creating millions of good-paying jobs for hardworking Americans,” the president stated. “It’s about reducing bottlenecks in our economy, reducing long-term price pressures. It’s about helping more people to work by helping ease the burden that parents bear, especially mothers, keeping them out of the job market.”

Earlier in the summer, the White House began shifting its messaging on inflation. Quietly, top administration economists agreed that the current bout of inflation, the worst since the Great Recession of 2008, closely resembled the three-year period following World War II.

However, administration officials publicly maintained that more than 60% of current inflation could be attributed to “transitory” automotive industry bottlenecks that would resolve themselves by the end of the year.

“We fully expect these bottlenecks to be temporary in nature and to resolve themselves over the next few weeks,” Sameera Fazili, deputy director of Biden’s National Economic Council, told reporters in June. “These are good problems to be having. Demand came back much quicker than even companies expected.”


NEC Director Brian Deese similarly said in a speech that the White House is “hearing from industry participants that you should expect some improvement sequentially over the second half of this year.”

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Tags: News, Joe Biden, White House, Ford, Chrysler, General Motors, Inflation

Original Author: Christian Datoc

Original Location: Biden’s inflation woes persist with production stoppages at ‘Big Three’ automakers