Count Matthew Portu as one of those glass-is-half-full people. As president of Freudenberg NOK Sealing Technologies, he's encouraged by the recovery his company has experienced since the second half of 2020. He expects the recovery to continue fairly smoothly, barring any major hiccups.
"I think we are nipping at full strength right now. We are very close," Portu said.
"Early in the crisis, it was assumed and universally thought that we would not return to normal until 2024 or 2025. We had these thoughts as well, and the reality was nobody really knew. We certainly started to see a robust recovery happening, first in China and then in Europe and then in the U.S. I think we are really very, very close to being back to a 'normal' and healthy automobile sector."
That's not to say that there won't be additional hurdles along the way. The industry-wide microchip shortage already is posing problems for auto production.
The root of the issue, Dziczek said, is that the pandemic created a demand for consumer electronics, which increased demand for the chips, many of which also are used in vehicle electronics. Shifts to remote work and remote learning led to a surge in purchases of office electronics, desktops and laptops.
Stay-at-home orders also led to increased demand for entertainment electronics such as video game consoles. This surge was compounded by the release of some newer, in-demand consumer electronics such as the Play Station 5 and the latest Apple iPhone.
"Everyone tricked out their home office or home school space, and that had a big impact on demand," Dziczek said. "Shifting that demand back to the auto industry is going to take some time."
Schuster agrees that the microchip shortage will remain a hurdle for the auto industry moving forward, but he does not see it as being a long-term issue.
"That may not have a lasting impact," Schuster said of the chip shortage. "But it is going to cause some disruption in the structure of the recovery path in the spring and into the summer."
Moments of self-reflection
The pandemic did expose the strengths and weaknesses within the auto industry. Every company along the supply chain wrestled with big problems and the industry, as a whole, tackled some together.
"I think the (industry's) strengths and weaknesses are the same thing," Dziczek said. "Depending on what context you are in determines whether (something) is a strength or a weakness."
For instance, the global supply chain, which had been a critical strength of the auto industry, just wasn't a strength in 2020. Early in the pandemic, components makers couldn't produce what was needed due to parts shortages or shutdowns. At other points, shipping complications prevented completed parts from getting to the auto makers.
Dziczek does not believe the pandemic will change how auto makers view their supply chains—it will remain a global industry, sourcing parts from around the world.
"It has always been a strength to have many eggs in many baskets," Dziczek said.
Portu noted that the complications experienced during the pandemic went far beyond typical supply chain disruptions and likely will not be replicated often.
"This was different—noticeably different—in that everybody was in the same boat at the same time," Portu said. "Typically, you have one segment that might be impacted or one supplier or one OE. But this was everywhere; it was happening to everybody very rapidly."
It is likely that, moving ahead, the auto industry will have a better idea of how to approach major supply chain disruptions that occur simultaneously. It likely also will have a plan for addressing shortages.
Schuster speculated that in the months and years ahead, OEMs and suppliers will rethink what it means to run lean operations.
"The industry has been running quite lean, which has been considered healthy," Schuster said. "When you're running lean, you have to adapt quickly if things decline, but it also means when there is something like this and you don't have production, you don't have enough of a buffer to handle that."
Chance to grow
Michelin North America Inc. saw 2020 as a chance to adapt and position itself as a leader in a newly defined automotive landscape.