GM cut production in several North American plants due to a lack of chips
The engines were assembled en route down the assembly line at General Motors (GM) manufacturing facility in Spring Hill, Tennessee on August 22, 2019.
Harrison McClary | Reuters
DETROIT – General Motors is temporarily idling or extending shutdowns at several plants in North America due to an ongoing shortage of semiconductor chips affecting the global automotive industry.
The temporary closures range from one or two weeks to several additional weeks for systems that have already been shut down due to the lack of parts.
The cost of the closings was factored into the company’s earnings forecast for the year, according to GM. The automaker believes the issue will cut its operating profit by $ 1.5 billion to $ 2 billion this year.
“We continue to work closely with our supply base to find solutions to our suppliers’ semiconductor needs and to reduce the impact on GM,” said GM in a statement sent via email. “Our intention is to make up as much production loss as possible in these plants.”
The automaker’s Spring Hill, Tennessee facility will close Saturday through April 23, according to a notice from the United Auto Workers union to workers received from CNBC. The system builds the crossovers GMC Acadia and Cadillac XT5 and XT6. GM confirmed the shutdown.
In addition, GM said another crossover plant producing the Chevrolet Traverse and Buick Enclave in Lansing, Michigan will be shut down the week of April 19, and production of the Chevrolet Blazer at a plant in Mexico this week is set.
The company is also extending downtime at plants in Kansas and Canada that manufacture cars and crossovers through mid-May. They produce the Chevrolet Malibu sedan and Equinox and Cadillac XT4 crossovers. At another plant in Lansing, which manufactures the Chevrolet Camaro and the Cadillac CT4 and CT5, the downtime has been extended by two weeks to the first week of May.
For months, GM has been prioritizing the assembly of high-margin vehicles like full-size pickups by reducing the production of cars and crossovers. The company even partially builds pickups to finish and ship them out at a later date.
Semiconductors are key components that are used, among other things, in the infotainment, power steering and braking systems of new vehicles. With multiple plants closed due to Covid last year, suppliers turned semiconductors away from automakers and into other industries, creating a shortage after consumer demand fell more than expected.
Consulting firm AlixPartners estimates the chip shortage will reduce global auto industry sales by $ 60.6 billion this year.
The company expects to see adjusted pretax earnings this year of $ 10-11 billion, or $ 4.50-5.25 per share. The automotive sector is projected to have adjusted free cash flow of $ 1 billion to $ 2 billion in 2021. The projections take into account the potential impact of chip scarcity, including a $ 1.5 billion to $ 2.5 billion impact on free cash flow.