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General Motors is Cutting Vehicle Production Until Mid-March Due to Ongoing Chip Shortages

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【Summary】General Motors is cutting vehicle production due to the ongoing shortage of chips and semiconductor components. The cuts will extend at least until Mid-March at three of GM's plants. In addition, the vehicles produced at two other plants will only be “partially built” until the chips are available to finish assembly, the automaker said.

Eric Walz    Feb 09, 2021 9:55 AM PT
General Motors is Cutting Vehicle Production Until Mid-March Due to Ongoing Chip Shortages
General Motors is cutting vehicle production at its plant in Fairfax, Kansas, which produces the Cadillac XT4 & Chevrolet Malibu sedan.

Like many automakers, General Motors was forced to cut vehicle production due to the ongoing shortages of chips and semiconductor components used in its vehicles. Now the automaker says that the production cuts will extend at least until Mid-March at three of its plants. In addition, the vehicles GM produces at two other plants will only be "partially built" until the chips are available to finish assembly, the automaker said.

GM did not disclose the impact volumes or say which supplier and vehicle parts were affected by the chip shortage.

The announcement results in GM's share price falling by around 1% on Tuesday.

In the meantime, GM will focus on keeping the plants running that produce its more profitable full-size pickup trucks and SUVs. GM said it intended to ramp up production once the chip shortages are resolved to make up for the lost ground.

"Semiconductor supply remains an issue that is facing the entire industry. GM's plan is to leverage every available semiconductor to build and ship our most popular and in-demand products," GM spokesman David Barnas said in a statement to Reuters.

The plants affected are GM's factories in Fairfax, Kansas, which produces the Cadillac XT4 and Chevrolet Malibu sedan; its assembly plant in Ingersoll, Ontario, which produces the Chevy Equinox SUV; and its Mexican facility in San Luis Potosi that builds the GMC Terrain SUV and Chevy Trax.

The automaker's other plants in Wentzville, Missouri and Ramos Arizpe, Mexico will partially build vehicles until the automaker can percure the chips for final assembly. The Wentzville factory builds the Chevrolet Colorado pickup, Chevrolet Express van and GMC Canyon pickup and GM Ramos Arizpe plant builds the Chevrolet Blazer. 

The growing chip shortage has affected many other automakers besides GM, including Toyota, Volkswagen, Stellantis, Ford Motor Co, Renault, Subaru, Nissan, Honda and Mazda.

In mid January, Ford Motor Co, Subaru Corp and Toyota Motor Corp announced production cuts at their factories in the U.S. 

Ford shut down its Louisville, Kentucky plant last month which employs roughly 3,800 hourly workers. The company said last week the shortage was affecting production of its highly profitable and popular F-150 pickups. The automaker said it could lose 10% to 20% of planned first-quarter vehicle production and earnings could fall by $1 billion to $2.5 billion.

Automakers affected by the shortages in European markets include Volkswagen, Nissan and Fiat Chrysler Automobiles (FCA).  Volkswagen's luxury brand Audi announced last month it would reduce hours for about 10,000 employees at its Neckarsulm and Ingolstadt plants in Germany.

Japanese automakers Honda and Nissan said they would sell 250,000 fewer cars in 2021 as a result of the shortages.

The shortages are unprecedented and appear to have caught the auto industry off guard, as sales have rebounded and automakers ramp up production of best selling models to pre-pandemic levels.

In addition to the auto industry, the chips are in high demand for consumer electronics, such as laptop computers, gaming consoles and other entertainment devices, which sales have spiked due to the pandemic as people look for entertainment options during the pandemic. 

The high demand led to shortages throughout 2020, but its only now being felt by the world's automakers.

Another factor leading to shortages is rebounding auto sales in the latter half of 2020. During the beginning of the pandemic, automakers experienced declining sales due to a stalled economy and rising unemployment brought on by the global pandemic. As a result, automakers reduced their orders for computer chips in early 2020. 

But as sales recovered faster than expected in the third and fourth quarters and automakers began to ramp up production, it caused a spike in demand for chips.

In Taiwan where much of the world chips are produced, the country is offering assistance. 

Two weeks ago, contract manufacturer Taiwan Semiconductor Manufacturing Co Ltd (TSMC) said it will prioritize production of auto chips and will work to increase capacity, Taiwan's Economics Ministry said. TSMC is the world's largest contract manufacturer of chips. 

Analysts are calling the recent chip shortages "extreme" and predict that the supply chains won't stabilize until spring at the earliest. But with so many of the world's automakers affected by the shortages, it looks as though it might last until the summer.


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