Biden orders review of U.S. supply chains with early focus on autos

Washington — President Joe Biden issued an executive order Wednesday directing a review of U.S. supply chains with a special focus on key sectors affecting the U.S. auto industry, including semiconductor manufacturing, high-capacity batteries used in electric vehicles and rare earth minerals.  

The supply chains for these three "critical sets of products" — as well as the supply chain for medical supplies, which struggled with shortages early in the COVID-19 pandemic last year — will be subject to a 100-day review, administration officials told reporters Tuesday evening during a background call.

"We're going to get out of the business of reacting to supply chain crises as they arise and get into the business of getting ahead of future supply chain problems," the officials said. "This (order) is focused on ensuring that American supply chains are resilient, diverse, secure and promote broad-based growth across the country."

The order also directs agencies to complete sector-specific reviews in defense, public health, communication technology, transportation, energy and food production within one year. 

"We're not simply planning to order up reports. We are planning to take actions to close gaps as we identify them," officials said. 

The order comes amid a global shortage of semiconductor chips necessary to produce modern vehicles and as the nation's leading automakers pivot to invest more in electric and autonomous vehicles, which will be more reliant on batteries and the minerals needed to make them. 

U.S. automakers praised the order Wednesday.

"We welcome the Biden Administration’s continued support for supply chain resiliency, and we are committed to working collaboratively in support of U.S. manufacturing, jobs and the environment," said John Bozzella, president of the Alliance for Automotive Innovation, a group representing major automakers selling vehicles in the U.S. 

"Resilient supply chains are key to long-term investments in advanced automotive technology — including electrification, advanced safety features, and automated driving systems — and ensuring the U.S. remains an innovation leader."

Ford Motor Co. released a statement saying it appreciates the administration's actions to address the semiconductor shortage: "It is incredibly important for our labor force, our customers and our business that we have a commitment to end this shortage as soon as possible."

Sen. Gary Peters, D-Bloomfield Township, called the order an "important and necessary" step to secure supply chains that support Michigan's auto industry and others.

China is both a major competitor and supplier for the U.S. auto industry, which is racing with automakers in Europe and Asia to develop and deploy electric and autonomous vehicle technology.

Bipartisan members of Congress and experts have argued in recent years that the nation's dependence on China for products such as rare earth minerals is a strategic vulnerability that could be weaponized.

The order isn't "singling out any country," officials said. However, several of the supply chains do have direct connections with the Asian superpower. The reviews will include analyses of whether the U.S. is "excessively dependent on a competitor nation."

While overdependence on foreign sources will be a priority for review, "it's not about reshoring all supply chains to America," the officials said. "Resilient supply chains are not the same thing as all products being made in America by American workers, and that is not our intention here."

Other allied countries may be tapped to provide certain products that can't easily be found in the U.S., such as some rare earth minerals.

General Motors Co., Ford Motor Co. and Stellantis NV have all had to cut production because of the global semiconductor supply shortage. Research firm IHS Markit expects the current struggle with chips to hit bottom at the end of March, but the supply is expected to remain tight into the third quarter of the year.

GM CFO Paul Jacobson stressed Wednesday at the Wolfe Research Autos Conference that the impact of the chip shortage is short-term: "Over the last couple of weeks, as we talked about this being a volatile situation, we have actually seen the situation get better for us."

Jacobson added that the company is confident it will meet its guidance for the year. The automaker expects pretax profits to total $10 billion to $11 billion in 2021. "We feel confident that we're working through this issue and we'll be able to return to normal as soon as the back half of this year."

Meanwhile, Ford CEO Jim Farley on Wednesday called for domestic production of EV batteries.

“We need to bring battery production to the U.S.,” he said at the same conference. “We can’t go through what we’re doing with chips right now in Taiwan. It’s just too important. And this is a huge, multi-solution opportunity.”

Ford recently found itself in the crosshairs of an intellectual property dispute between EV battery giants LG Energy Solution Co. and SK Innovation Co. that could threaten the automaker’s battery supply for its planned electric version of the F-150. Ford executives have previously hinted that the automaker might opt to build its own electric battery cells in the future.

The White House has been discussing potential solutions to the semiconductor chip shortage with automakers and suppliers and has reached out to officials in Taiwan, which is home to the world's largest chip producer.

The supply chain order is unlikely to solve the global chip shortage within the next 100 days, but the officials said it offers lessons for "longer-term solutions." In the meantime, the administration is "actively engaging" with the industry to ensure U.S. automakers get a portion of chips produced globally.

While the officials hope that the executive order will serve as a "mobilizing force" to prompt long-term changes to strengthen the supply chain, the executive branch is limited in how much it can do to implement long-term policy and funding for changes. The administration plans to use government purchases and may consider tariffs or incentives to push changes. 

The order follows another executive order late last month aimed at strengthening the existing Buy American law, which requires prioritizing U.S. companies in government purchases with some exceptions. 

Kalea Hall and Jordyn Grzelewski contributed.

rbeggin@detroitnews.com

Twitter: @rbeggin