The Effects of Hurricanes Helene and Milton on the Automotive Industry

LeeAnn Shattuck (00:01.966)

Hey everyone and welcome to the Straight Shift with The Car Chick. I’m LeeAnn Shattuck, and I know in the last episode I promised you guys we would be talking this week with the clients of mine about his experience owning an electric vehicle and why he decided to go back to gas. However, we’re going to have to push that to next week because we had a hurricane come through. Hurricane Milton slammed Western North Carolina and surrounding areas as well as Florida. 

I’m here in Charlotte, North Carolina area and we got off lucky. Our impacts were relatively minimal compared to the absolute devastation that was raked on our mountain communities. So I wanted to talk today about the impacts of Hurricane Helene and then Milton that of course came along the next week, how that’s going to affect the automotive industry.

I have talked in the past about previous hurricanes and how they have affected the industry. But that content, along with a lot of the content that you’re probably going to see in the coming days and weeks in the mainstream media, has focused on the impact in terms of flood cars and how they’re going to be on the market and what you need to do to avoid accidentally buying one of these flood cars. That’s usually the focus.

But there are much bigger impacts to the global automotive industry that most people don’t even think about and wouldn’t even know to think about. And those are the things that I want to talk about today. And I know they they pale in comparison to the suffering that so many thousands of people and small businesses are experiencing right now because they have literally lost everything. And I’ve spent the last few weeks along with many other individuals, business owners across the Carolinas working on those relief efforts to help. 

I do want to give a shout out to my buddies over at GMP Performance. GMP is a German specialty automotive shop that does performance and track support as well as maintenance for people with German cars, mostly race car drivers and my fellow track junkies. And they just had a tremendous effort to get supplies together and raise money to get out there literally the first week after Helene hit to try to help these communities in the immediate aftermath of the hurricanes. I was very lucky to be able to help them with their logistics.  One thing that we race car people are really good at… one is getting up at the butt crack of dawn and loading up trailers with supplies and driving to the middle of nowhere.

And so that is what my friend Stephen, who owns GMP and his team did. We got lots of supplies loaded up that were donated and it included almost 200 gallons of fuel because that was one of the immediate concerns. And they have these huge containers that they normally put gas in to take to the racetrack to refuel the cars. We figured why not load those up with gas and see if we can refuel vehicles like ATVs and some of the boats that they were using to do these amazing rescues. Maybe we can help with that.

So we sort of had a plan, but you know, the other thing that race car people are good at is when plan A inevitably goes to hell, it always does. We’re good at pivoting and solving problems on the fly and just kind of making it up as we go along. And so once the guys started getting up into the mountain areas, we realized that there were some different needs, different places to be.

They found some local volunteer fire departments that had been running those types of rescues that were out of gas. So they were able to help refuel their vehicles and get supplies and rescue personnel to the communities and the individuals that needed it the most. So I really commend their efforts. Thanks so much, GMP. And I know they are continuing along with the rest of the Carolinas to pull together and continue to help folks.

You know, it hit me really hard because my sister and her family and I have a lot of friends. all live in the Hendersonville area that was just directly hit. And thankfully my family and all of my friends, they are all safe, minimal property damage, just a lot of inconvenience. Fortunately they had generators and so they’ve been able to maintain power, boil water.

LeeAnn Shattuck (04:48.018)

And my sister, I think, has fed half of Hendersonville from her kitchen, helping out the neighbors. My nephews are also in the automotive industry, of course. And Cameron works for Asheville Ford, and they were shut down for two full weeks. So while Cameron was off work, he and his younger brother, Braden, who owns his own car detailing business in Hendersonville, they use their trucks and Braden’s trailer and all of his big water tanks to bring water and supplies to their needy neighbors in the area. And they have continued to volunteer their time and their resources to help their neighbors. And very proud of my nephews. I have to give them that shout out to, and to all of my family.

So there are thousands and thousands of people who were not as fortunate as we were. And with the death toll and still a lot of people missing, the human toll is devastating. So I don’t ever want to minimize that. But I do want to go into talking about some of the economics around these hurricanes and the areas that they’ve impacted and how that is going to hit the automotive industry.

LeeAnn Shattuck (05:56.936)

One potential global impact to the automotive industry will be to semiconductors. Yes, we could have another chip shortage. And I know the other mainstream media outlets have been talking about it. They have been warning that we could see inventory shortages. The chip industry is going to be affected. Well, why would the computer chip industry be affected by hurricanes hitting the mountains of North Carolina?

Well, in this case, It’s not an impact to the chip manufacturing themselves, but further back in the supply chain, we’re talking about a key ingredient to producing those computer chips, and that’s quartz. I’m not just talking your garden variety quartz that you can literally find in your garden in your backyard, but high purity, high quality quartz that is required for the semiconductor industry.

The reason is, the highly pure quartz, 80 % of it in the entire world comes out of this little beautiful town called Spruce Pine, North Carolina. It formed millions of years ago in the Appalachian Mountains and just concentrated in this one little town that has a population of a little over 2200 people. That one town, the devastation that hit them from the hurricanes, could literally cripple a $600 billion global semiconductor industry. It’s mind boggling just how impacts in one place can affect another or everything else, but particularly a small mountain town in North Carolina could cripple the entire semiconductor industry and have downstream effects on the production of the thousands of different products that need computer chips that apparently we all can’t live without.

So you may have read a lot of scary articles in the media recently, but I wanted to explain it in a little more detail and kind of reassure you that it’s not going to be as bad as we had originally feared. But the fears were with good reason. These mines in North Carolina did have to shut down because there was catastrophic flooding, the roads were washed out, no power. no communications. So they had to shut down operations for safety. And these two companies were just, they really were fantastic. And they continue to be, they’re both Norwegian based companies, but they’re called the Sibelco and the Quartz Corp. And they do the mining and processing of the quartz.

Well, why is the quartz important? I bet you didn’t know when you listened into this podcast that you are going to get an education on semiconductor manufacturing processes. But here we go. I want to try and keep it simple.

This ultra pure quartz is used to create the containers called crucibles that hold the materials, the silicon materials, while it’s being melted down into the metal that can then be made into the chips. It takes this ultra ultra pure quartz to be able to withstand the high temperatures required to melt silicone while not introducing impurities into that process. Because if contaminants get into the silicone while it’s melting, the resulting metal that is turned into computer chips will result in computer chips that don’t perform for crap. So that is why this ultra pure quartz is so critical.

Why it’s only located in the Appalachian Mountains of North Carolina and not abundantly available in the rest of the world, that I don’t know. That’s a geology lesson for another time. But that is why we could see shortages in the semiconductor realm and how that will affect the automotive industry. Fortunately, one of the companies, Sibelco, which is the larger of the two, they are already back up and running.

The first thing these companies did was make sure that all of their employees and their employees’ families were safe. That was their top priority as it should be. And they didn’t suffer nearly as much damage as they had feared. A lot of it was to just some auxiliary facilities, their main processing plants, the mines themselves, and the places where they store stocks of the finished product. Those were all safe.

LeeAnn Shattuck (10:42.902)

Sibelco has already reopened operations and being the good corporate partner in their community, they’ve also launched a foundation and put in $1 million initially into that to help rebuild the area. So, we know this is going to be a long-term recovery effort for these communities and these companies are doing their part to take care of the communities that they rely on for their employees that they care about.  I’m really happy that that’s happening.

Quartz Corp is the smaller of the two. As of the middle of October, they were not yet up and running. That was not due to damage to their facility, but more due to the damage to the surrounding infrastructure where they just couldn’t get the power. They couldn’t get the trucks in and out to ship the product. So as that infrastructure gets repaired, then they’ll be able to get back up and operational.

But fortunately, again, they learned their lesson like many companies did during the pandemic when we found out just how interconnected and fragile our global supply chain is. And so they made plans to stockpile product, and they didn’t stockpile it just in North Carolina. They shipped it over to Norway where their headquarters are. So they have stockpiles of this processed silicone that can then be shipped out to their semiconductor partners, their customers to then make the chips.

So the bottom line is, despite what you may have read in the media, the initial fears of this catastrophic impact to the semiconductor industry, dodged a bullet there due to much better planning and a little dumb luck. So while we will see hiccups, we’re not gonna see the catastrophic impacts that we had during the pandemic.

But there are more pieces to the supply chain puzzle in the automotive industry than just the computer chips. And that whole supply chain has been affected by these hurricanes. General Motors was forced to shut down two of their key plants in Texas, where they build the heavy duty, very profitable and popular pickup trucks and the larger SUVs, like the Yukon XLs and the Tahoe’s.

LeeAnn Shattuck (13:04.778)

 They were supply chain issues, again, mostly due to products they needed to build those cars coming into the ports in Florida that were impacted. So they had to shut down production for a couple of days. So we may see some disruption to the timelines and deliveries of those larger vehicles to dealerships and customers this fall.

It only takes a short amount of downtime at a production plant to wreak havoc in those timelines. There’s just this ripple effect. And that’s what’s happened with all the logistics. Because not only did Hurricane Helene come through and cause some damage to Florida, but then Milton came through. It’s like the hurricane of the month club. We really don’t need that.

And the Tampa Bay port and the Jacksonville ports both had to shut down, both for safety reasons prior to and during the storm. Then after the storm, they had to do all the inspections to make sure that the facilities were safe and could be reopened safely and be fully operational. You think, okay, a couple of days, they were down, big deal. Why is this so critical and potentially crippling to our supply chain and our logistics? Why can’t you just reroute ships to other ports? Well, so many of the cars that come into the Southeast region to be delivered to those geographies do come into those two ports. And because of the just the port logistics and how they operate, including the massive amounts of security, you can’t just reroute these giant ships. And specifically for the automotive industry.

When a car arrives at a port, it’s produced in Japan, for example, and it floats over on a container ship, the ports don’t just serve as the place to offload those containers and open them up, let the cars out, load the cars onto trucks, and then send those transports to the dealership. There are things that happen at the port in between the car arriving and it getting shipped out to the dealership. And those are called port side operations or port operations.

LeeAnn Shattuck (15:22.222)

Toyota’s main port operations are at the port in Tampa. So what happens is they bring the cars out of the containers. They have to be inspected to make sure no damage happened during shipping, which does happen. And they actually have body shops at the ports to do the repairs if they’re minor enough that they can be repaired before putting the brand new car on the truck. So yeah, technically you can buy a new car that’s had damage, but they do a good job typically of fixing those things, but it’s often done at the port instead of putting that burden on their dealers.

They also have to go through emissions inspections so that they can prove that yes, the cars actually do meet the emission standards that the manufacturer said they would and that everything is compliance with the US law or whatever port in whatever country they are going to.

And then you also have accessories that are put on the car at the port. Sometimes if you look at the new car window sticker, you will see a section that may say port installed accessories. So they may have installed things like the floor mats, bumper appliqués, maybe the roof rack. Those things often get installed at the port instead of at the factory, either for economic reasons because they’re produced in the home country or the demand for those particular products is unique to that country, unique to the US, you know, we’re the only people that really put roof racks on things. We just like our stuff. So those things are done at the port. All of those operations get disrupted when you have to shut down the port.

So as a result for Toyota specifically, it’s had the back stream ripple effect all the way back to Japan, where they have had to pause the shipping and even production and planning of cars to make up for just those short stoppages at the port. It’s ridiculous how this ripple effect happens. So Toyota’s had to pause their allocations, which is they’re allocating and telling the dealers what new vehicles they’re going to be getting in the next 30 to 60 days. They’ve put a pause on that right now as of the middle of October for the dealers in the Southeastern region because of all the backups.

LeeAnn Shattuck (17:41.642)

So again, that’s gonna cause more inventory problems from Toyota like they need anymore. So it’s just a lot more complicated than people think than just having the ship go to another port and unload the cars there. It’s just not that simple. Nothing in life is, right?

Finally, the last thing that I wanted to talk about is a little more direct impact to consumers and that’s gonna be used car prices. Because as the recovery efforts proceed, and the insurance companies start stroking checks to all the people whose vehicles were flooded, damaged by the water, the wind, the debris, cars that literally just washed away in the floodwaters and may not be found until the next year. There’s going to be a lot of losses. As the insurance companies start stroking checks, those people are going to run out and replace their vehicles because they need them. So we’re going to see a sudden spike in demand because most people replace their lost vehicle within 30 to 60 days. So that’s going to create an immediate spike in demand for cars. And we’re still suffering some shortages of the supply, but also we’re going to see more shortages because dealers in Florida and the Carolinas will have lost some inventory.

Now, most of them seem to have done a really good job of trying to secure their cars so they would be safe and not get destroyed by the hurricane. But there will be some losses. So the dealers are going to be frantically searching the country, going to all the auctions all over the nation, searching all of their wholesale resources to source used cars that they’re going to need for their lot to replace what they lost and to be able to sell to the people that lost their vehicles.

And they’ll look as far and wide as they have to to restock their lots. So it’s not just that the prices will go up in the Southeast. It’s going to affect the whole country. So dealers in California are going to be paying more for used cars and passing it on to the consumer, just like dealers in Florida and the Carolinas. So again, we just have such an interconnected global system for everything that, you you drop a little rock into the pond and those ripples just spread out and spread out and spread out.

LeeAnn Shattuck (20:02.22)

But fortunately, the negative impacts to the automotive industry are a lot less than we feared they would be. But that’s not true for the thousands of people who have lost their homes, lost their businesses, lost loved ones, lost pets, literally lost everything. my challenge to you today is to, you if you haven’t already, or even if you have already,  continue to look for ways that you can help with the relief efforts. It’s gonna take years to rebuild these communities and the needs are changing from week to week as they go from immediate relief to rebuilding infrastructure. People are losing their jobs, their livelihood as these, especially the small businesses that have been destroyed. And so we’re just gonna need to continue to help our neighbors, help our fellow Americans.

So if you can, you know, donate money, donate needed supplies, if you don’t know where to find out where to make those donations, because unfortunately, the scammers just love to capitalize on tragedy. And there are a lot of websites that have been set up that look like they’re relief charities, but they’re not their scammers. So the safest thing to do is to Google one of the radio stations or television stations, you know, in Charlotte, in Raleigh, in Atlanta, in Tampa, you anywhere in Florida, anywhere in the Carolinas. Those radio stations, they are usually partnering with different charities or different organizations that are helping with relief. So some of them are partnering with food banks because we’re going to need to continue to supply food to the people who have lost their jobs and can no longer afford to buy food.

You can always donate to the Red Cross. Operation Airdrop is continuing to operate. It’s not hard to find the legitimate organizations that are really doing good and important work alongside of the government agencies that are also busting their butts to help us rebuild. So if you can, even $5, please donate to one of these organizations. If you don’t have money to donate, but maybe you live in the region, please look for ways to donate your time. 

LeeAnn Shattuck (22:26.142)

They desperately need help sorting and distributing supplies, just the logistics behind these relief efforts are insane. So they need bodies with hands to do the physical work to help with the relief efforts. And even if that’s not possible for you, you can help by not spreading the misinformation that’s out there, not falling victim to it, and helping to get the word out that these relief efforts are going on both through private organizations and the government. The response honestly has been tremendous. I have seen it with my own eyes. So any way that you can help will make a difference. know, we are North Carolina strong, we are America strong.

And so that is going to be the impact of the hurricanes for years to come, along with the flood cars. So, all right, I can’t get away without addressing the flood cars.

If you are concerned about, you if you have to buy a used car sometime in the future and you’re worried that you might end up finding one of these cars on a used car lot, because yes, even though they’re totaled by the insurance companies, many of them do end up back on the market. And there are some unscrupulous characters in the automotive industry that will do things to hide that information, shall we say, with title washing and some other interesting techniques, so you do have to be extra careful.

If you want to learn my process and how I avoid buying flood cars when I’m shopping for my clients, I do cover that in the used car module in my online car buying course, the “No BS Guide to Buying a Car”. And you can find that at carbuyingcourse.com or you can also find it on my website at thecarchick (and that’s c-h-i-c-k).com along with a ton of other great advice giving you all of my knowledge on how to buy a new or used car.

I hope this information was helpful and that it clarified some potential confusion with what you may have read in the media and quelled the panic over, my God, we’re not gonna have any computer chips. The initial fears were justified, but we have dodged a bullet and it’s not gonna be nearly as bad as we feared.

LeeAnn Shattuck (24:45.726)

So thanks again for listening. And I promise next week I will have my amazing guest, Glenn Jaffe, talking about why he got rid of his beautiful electric vehicle after just 10 months. Until then, drive safely, folks.