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COVID-19 crisis exposes major flaws in auto supply chain

The supply advantages of increased U.S. production are obvious. It would tighten what’s become a far-flung chain, weaning automakers off dependence on foreign suppliers and offering a leaner, faster route to reduce the cost of stockpiling inventories across the globe.

It’s also beginning to make more economic sense. The global chain as a whole is only getting more expensive. Even in North America, that has become more so with the U.S. Mexico-Canada Agreement, which requires wage increases for Mexican workers and higher domestic content requirements to avoid tariffs.

Another issue is the state of U.S.-China trade relations in the age of COVID-19, making it highly doubtful that production for export to the U.S. will expand in China over the next few years.

While some suppliers are examining alternatives in other Asian locations such as Thailand and Vietnam, that carries its own risks and potential disruptions.

Still, U.S. manufacturers face obstacles of their own, including the investment in new plants, new tooling and the automation and robotics required to replace cheaper, unskilled labor elsewhere. These are no small tasks for an auto industry beset by uncertainty.

Perhaps most critical is the factory labor shortage.

Despite years of calls to rebuild U.S. manufacturing, factory work still carries a stigma — especially among young American workers — leaving the country short of skilled and unskilled employees in its plants.

Yet opportunity still knocks for smart, aggressive suppliers.

For example, automation will make for better products with less labor. And investment — be it through new plants or purchasing weaker competitors — may allow the strong to grab market share at a crucial time.

While the coronavirus may have left the industry in disarray, it’s creating a prime chance to expand one’s business blueprint.

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