General Motors is the Latest Automaker Forced to Cut Production Due to Growing Chip Shortages

resource from: Reuters   

An employee inspects vehicles on an assembly line at the General Motors manufacturing plant in Spring Hill, Tennessee. (Photo: Reuters)

U.S. automaker General Motors Co is the latest automaker hit by the global shortage of semiconductor chips, the company said on Wednesday. The growing shortages of chips, which are affecting automakers globally, is forcing GM to scale back production next week at four assembly plants, Reuters reported on Wednesday.

The Detroit-based automaker said it will cut production entirely during the week of Feb. 8 at plants in Fairfax, Kansas; Ingersoll, Ontario; and San Luis Potosi, Mexico. In addition, GM will also run its Bupyeong 2 plant in South Korea at half capacity that week. The Chevy Trax compact SUV and Buick Encore crossover are both built at GM's Bupyeong factory.

The Fairfax plant produces the Cadillac XT4 and Chevrolet Malibu. GM's plant in Ontario produces the popular Equinox SUV. Other models affected are the GMC Terrain SUV. 

As reported by Reuters, GM did not say how much volume it would lose or which suppliers are affected by the chip shortage, but said the focus has been on keeping production running at plants building the highest-profit vehicles, which for GM are its full-size pickup trucks and SUVs, as well as the Chevrolet Corvette. 

AutoForecast Solutions, which tracks vehicle production, estimated that GM's combined lost volume would total almost 10,000 vehicles next week.

"Despite our mitigation efforts, the semiconductor shortage will impact GM production in 2021," GM spokesman David Barnas told Reuters in a statement.

"Semiconductor supply for the global auto industry remains very fluid," he added. "Our supply chain organization is working closely with our supply base to find solutions for our suppliers' semiconductor requirements and to mitigate impacts on GM."

GM said it intends to make up as much lost production as possible in the coming months, although that will depend upon the supply chain stabilizing. Other major automakers are experiencing chip shortages and are also being forced to scale back vehicle production.

Two weeks ago, Ford Motor Co, Subaru Corp and Toyota Motor Corp said they will curtail production in the United States. In early January, Ford shut down its Louisville, Kentucky plant for one week due to the shortages. The Louisville plant employs roughly 3,900 hourly workers and currently builds the Ford Escape and luxury Lincoln Corsair SUVs.

Japan's Mazda Motor Corp is considering cutting its global output by a total of 34,000 vehicles in February and March due to the shortage, sources told Reuters on Wednesday. 

"The global semiconductor shortage is presenting challenges and production disruptions for the global auto industry, including Ford, which could have a significant knock-on effect on jobs and the economy given the importance of auto manufacturing," Ford Motor Co said in a statement at the time.

The chips shortages are a result of the global pandemic in 2020, which led to declining auto sales beginning in the second quarter. It also caused automotive suppliers to scale back production. During this time period, automakers curtailed orders for semiconductors and chips used in vehicle production.

But as auto sales rebounded in the latter part of 2020 faster than expected, automakers resumed full-scale production of popular models causing a rising demand for chips and other semiconductor components. The production increases led to widespread chip shortages for automakers in the U.S., Japan and Europe.

In Taiwan where many of the chips are made, contract manufacturer Taiwan Semiconductor Manufacturing Co Ltd (TSMC) said last week it will prioritize production if possible in an effort to increase capacity, Taiwan's Economics Ministry said.

TSMC is the world's largest contract manufacturer of chips. In addition to the auto industry, TSMC also makes chips for Apple Inc. 

The chip shortage is expected to cause production in the global auto sector to be 672,000 vehicles lower than anticipated in the first quarter, IHS Markit said on Wednesday. The London-based business forecasting firm expects the shortage to last into the third quarter.

AutoForecast Solutions said announced lost production globally so far due to the shortage has totaled 564,000 vehicles and estimated the total impact this year could be 964,000 vehicles.

On Tuesday, 15 U.S. senators, including Majority Leader Chuck Schumer and others from key automotive manufacturing states such as Michigan, Ohio, Tennessee, Illinois, Indiana and South Carolina, urged the White House to work with Congress to address the worsening chip shortages.

Taiwan economic officials plan to host a virtual meeting with the United States at the end of this week to discuss supply chains, with semiconductor firms present.

resource from: Reuters

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.