Automakers Could Face Another Critical Supply Problem

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As if the lack of semiconductor chips wasn't already bad enough.

It's been a year since the first automotive assembly lines ground to a halt because of the coronavirus pandemic. Most managed to restart production throughout the summer under strict new health regulations to keep workers healthy. That's the good news. The bad news is that automakers are currently suffering from a global semiconductor chip shortage that's causing reduced production for some of America's most popular vehicles like the Ford F-150. Chevy shut down Camaro production entirely for the time being. If this weren't bad enough, there's now another supplier crisis brewing.

Bloomberg reports there will soon be a lack of natural rubber, a vital material for tires and anti-vibration parts found under the hood.

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Rubber prices have been increasing as supplies decrease, due to stockpiling by China, and a fungal disease affecting rubber trees in warm and humid climates like in Thailand and Vietnam.

The auto industry has long used a just-in-time manufacturing process that helps reduce costs by not having to pay to stockpile critical components, like semiconductor chips and rubber. Harsh lessons are now being learned to change that approach, something Toyota did with computer chips following 2011's tragic earthquake and tsunami. Producing enough chips is possible but requires time and money, but rubber is a different story. It takes seven years for it to mature. Nature can't be paid to work faster.

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Ford and Stellantis say they're closely monitoring the rubber situation but haven't been impacted yet. General Motors also remains confident regarding its rubber supplies. Tire manufacturers, however, are justifiably concerned. What about synthetic rubber made from petroleum? It could work in some cases but manufacturers prefer the natural stuff. It's also better for things like gloves and packaging tape, thus increasing the supplier competition.

For now, automakers and most of their major suppliers have enough natural rubber for the foreseeable future, but the market is already showing signs of tightening up. As China keeps stockpiling its rubber reserves, other countries would be wise to do the same before a potential global shortage.

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Source Credits: Bloomberg

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