GM Extends Vehicle Production Cuts Due To Semiconductor Chip Shortage
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General Motors Co said on Wednesday it was further extending production cuts at three North American plants and adding a fourth to the list of factories hit by the global semiconductor chip shortage. The extended cuts do not change GM’s forecast last month that the shortage could shave up to $2 billion from this year’s earnings. GM Chief Financial Officer Paul Jacobson subsequently said chip supplies should return to normal rates by the second half of the year and he was confident the profit hit would not worsen.
The U.S. automaker did not disclose the impact on volumes or say which supplier or parts were affected by the chip shortage, but said it intends to recover as much of the lost output as possible.
“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs,” GM spokesman David Barnas said. “We contemplated this downtime when we discussed our outlook for 2021.”
The chip shortage, which has hit automakers globally, stems from a confluence of factors as carmakers, which shut plants for two months during the COVID-19 pandemic last year, compete against the sprawling consumer electronics industry for chip supplies.
Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tight chip supplies. They also bought more cars than industry officials expected last spring, further straining supplies.
GM said Wednesday it would extend downtime at plants in Fairfax, Kansas, and Ingersoll, Ontario, to at least mid-April, and in San Luis Potosi, Mexico, through the end of March. In addition, it will idle its Gravatai plant in Sao Paulo, Brazil, in April and May.
“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs,”
The automaker did not disclose the impact on volumes or say which supplier or parts were affected by the chip shortage
The Detroit automaker had previously extended production cuts at three North American plants into mid-March and said vehicles at two other plants would only be partially built. Following Wednesday’s cuts, forecasting firm AutoForecast Solutions estimated GM could lose more than 216,000 units globally due to the shortage.
Ford Motor Co said last month the lack of chips could cut company production by up to 20% in the first quarter and hurt profits by as much as $2.5 billion. It had previously cut production of its top-selling F-150 pickup truck. Stellantis said Wednesday the chip shortage could weigh on 2021 results.
Some automakers, including Toyota Motor Corp and Hyundai Motor Co, avoided deeper cuts by stockpiling chips ahead of the shortage.
Industry officials and politicians have pushed U.S. President Joe Biden’s administration to take a more active role in dealing with the chip shortage.
Last week, Biden said he would seek $37 billion in funding to supercharge chip manufacturing in the United States. An executive order also launched a review of supply chains for such critical products as semiconductor chips, electric vehicle batteries and rare earth minerals.
Complicating matters was a severe winter storm in Texas last month that killed at least 21 people and led to the shutdown of several chip plants. Semiconductor industry officials said customers would face knock-on effects in several months.
Questions & Answers
Q.Which specific plants are affected by these new production cuts?
Which specific plants are affected by these new production cuts?
GM will extend downtime at plants in Fairfax, Kansas, and Ingersoll, Ontario, to at least mid-April, and in San Luis Potosi, Mexico, through the end of March. The Gravatai plant in Sao Paulo, Brazil, will also be idled in April and May.
Q.Has GM revised its financial outlook regarding the chip shortage's impact?
Has GM revised its financial outlook regarding the chip shortage's impact?
No, GM's forecast remains unchanged from last month. The company still expects the shortage to shave up to $2 billion from this year’s earnings, and the CFO is confident the profit hit will not worsen.
Q.What is causing the global semiconductor chip shortage?
What is causing the global semiconductor chip shortage?
The shortage stems from carmakers competing against the consumer electronics industry for chip supplies after shutting plants during the pandemic. Consumers also stocked up on electronics and bought more cars than expected, straining supplies.
Q.What measures are being taken to address the chip shortage at a national level?
What measures are being taken to address the chip shortage at a national level?
US President Joe Biden is seeking $37 billion in funding to boost chip manufacturing in the United States. An executive order also launched a review of supply chains for critical products like semiconductor chips.