The complexity of the global automotive supply chain and the risk automakers face when they depend on parts or raw materials from around the world was on full display recently during the Rainbow PUSH Coalition’s 23rd Global Automotive Summit in Detroit.
Automakers and Tier 1 suppliers, who have been struggling to recover from a semi-conductor chip shortage for more than two years, said they are more aware than ever of the risks and potential for disruption. While some have made efforts to reduce exposure to those risks, the transition to an electric vehicle future presents new risks that will be difficult to avoid.
While I’ve been reading about the chip shortage and global supply chain challenges, I had an opportunity to hear about them firsthand as part of team from Franco that provided the conference with media relations support. It was both jarring and fascinating to hear some of the industry’s top purchasing executives and executives from suppliers talk about the challenges.
For example, Jeffery Willis, chairman of United Rare Earths, provided some stark warnings about the lack of global mining capacity for rare earth metals that are essential for electric vehicle motors and batteries.
“Since many sources of rare earth minerals are in places such as Southeast Asia and China, there is concern that automakers will be increasingly vulnerable to global political strife as dependence on rare earth metals for electric vehicles increases in the future,” Willis said.
Willis said United Rare Earths, a United States owned downstream processor of heavy rare earth minerals, is dedicated to finding a domestic approach to finding and refining rare earth elements.
In 2019, China was responsible for 80% of rare earths imports, according to the U.S. Geological Survey. According to a CNBC story, rare earths elements are more abundant than their name suggests but extracting, processing and refining the metals poses a range of technical, political and environmental issues. That is why the Biden administration and Department of Energy have identified rare earths as a domestic supply chain priority.
“China has developed its capability throughout decades and what we want to do through partnerships is to start to seed a new supply of rare earth minerals that provide an alternative for the western supply chain,” said Tim Harrison, managing director at Ionic Rare Earths, a West Perth, Australia- based company that is the majority owner of a Rare Earth mine in Uganda. “The ability to bring on a new supply is increasingly important to producing the EVs that the world is wanting to develop.”
Purchasing VPs urge competition and cooperation at every level
The main theme of the 23rd annual Rainbow PUSH Global Automotive Summit was to discuss how to strengthen and create opportunities for people of color at all levels of the industry as the automotive industry makes a transition to electric vehicles.
In the past, the emergence of global supply chains made diversity and inclusion purchasing programs more complicated as automakers increasingly sourced purchasing to low-cost suppliers in other countries.
Now, as companies move supply chains closer to home in reaction to the supply chain disruptions from the global pandemic, purchasing executives said minority-owned U.S. companies have an opportunity to gain a larger role in the EV supply chain.
But to be successful, the industry needs collaboration and competition at all levels – from the extraction of material used in crafting motors and other components, the company supplying those that sell the vehicles and the companies at the end of the line who help to keep these vehicles moving long after they rolled off the line.
“We have about 300-plus diverse suppliers that we (General Motors) do business with today and 38 of those are African American – which represents close to a billion in business each year,” said Jeffrey Morrison, vice president of global purchasing and supply chain for General Motors. “Our goal is looking to how we do more and how we can help suppliers that we do have today grow while increasing their capabilities.”
Jonathan Jennings, vice president of global supply chain for Ford Motor Co., stressed the importance of education and engagement with minority suppliers to ensure they know the opportunities available to them in the transition to EVs.
“There are going to be continued opportunities for African American suppliers to partner with mature companies who have been in this business for a long time,” Jennings said. “We’re going to take that first step around educating, engaging and being real in how we help our suppliers understand the needs and requirements that will set them up for future opportunity.”
As delicate as a precision watch
Like a watch that operates through a series of complex gears and springs, the different tiers of suppliers all have a role in keeping the automotive industry ticking. With the shift toward more advanced mobility solutions, the Global Automotive Summit made clear that the future of automotive production must be rooted in equity, with a seat at the table for everyone willing to lend their talents.
As an integrated communications professional, I gained a deeper understanding of how complex the global supply chain is and how challenging it will be to ensure diversity and inclusion programs are not ignored during the electric vehicle transition. In the coming years, it will be critical for companies to understand what they are buying, who they are buying it from and how to effectively tell their purchasing story.
By understanding these takeaways, communications professionals can better position themselves and their clients in and beyond the automotive scene for success as electric and autonomous efforts accelerate.
John Bozick is an Integrated Communications Specialist at Franco. Connect with him on LinkedIn.