President Biden to order a review of US supply chains for vital goods

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The Associated Press
Published 8:53 a.m. ET Feb. 24, 2021 | Updated 11:18 a.m. ET Feb. 24, 2021

President Biden held a moment of silence and candle-lighting service to mark the 500,000 lives lost to COVID-19 in the United States.

USA TODAY

WASHINGTON – President Joe Biden is preparing to sign an executive order to review U.S. supply chains for large-capacity batteries, pharmaceuticals, critical minerals and semiconductors that power cars, phones, military equipment and other goods.

The United States has become increasingly reliant on imports of those goods – a potential national security and economic risk that the Biden administration hopes to address with the planned 100-day review and the possibility of increased domestic production, according to administration officials who insisted on anonymity to discuss the order. But Biden will also look to work with international partners to ensure a stable and reliable supply chain.

The order being signed Wednesday will include sectoral reviews to be completed within one year for defense, public health and biological preparedness, information communications technology, energy, transportation and food production.

Over the past year, the fragility of vital supply chains has been revealed repeatedly. The coronavirus outbreak led to an initial shortage of masks, gloves and other protective medical equipment. Automakers in the United States and Europe are now dealing with a shortage of computer chips.

President Joe Biden speaks after a tour of a Pfizer manufacturing site, Friday, Feb. 19, 2021, in Portage, Michigan. (Photo: Evan Vucci, AP)

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Administration officials have met with automakers and are talking with foreign counterparts on how to boost supplies in the short term. But there is no magic bullet to immediately fixing the lack of semiconductors for automakers, an administration official said.

The chip shortage is indicative as to why Biden is trying to be proactive with the reviews, so supply chains can be strengthened to prevent new challenges from emerging. Administration officials say that they plan to partner with industry and members of Congress as part of the effort and that no tool is off the table, including the Defense Production Act, which gives the president emergency authority to mobilize domestic industries.

Nearly every major automaker that produces vehicles in the U.S. has cut production because of the shortage by canceling shifts, slowing assembly line speeds or temporarily closing factories. Most automakers have tried to limit the cuts to slower-selling vehicles.

But the shortage has forced the Ford Motor Co. to at times cancel shifts at two plants that make the F-Series pickup, the top-selling vehicle in the nation. Besides Ford, Stellantis (formerly Fiat Chrysler), General Motors, Toyota and Honda have had to slow production.

Some are building vehicles without computer chips, which control engines, brakes, transmissions and other tasks, so they can be installed once more semiconductors are available.

The chip shortage has cost the global auto industry the production of about 1 million vehicles, according to IHS Markit. The analytics firm expects the chip shortage to hit bottom toward the end of March.

IHS Markit expects the lost production could be made up later in the year. But the shortage could compound already tight vehicle inventories in the U.S., driving up prices that rose when factories were closed last year because of the coronavirus pandemic.

Moody’s predicts that the chip shortage will cost Ford and General Motors about one-third of their pretax earnings this year. It also expects electric vehicle maker Tesla to be affected, although less than GM and Ford.

The U.S. Semiconductor Industry Association says the country’s share of global chip manufacturing capacity has dropped from 37% in 1990 to 12% today. The association wants Washington to fund domestic semiconductor manufacturing and research and pass an investment tax credit to help build and modernize chip factories in the U.S.

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