GM extends vehicle production cuts due to chip shortage

DETROIT -- General Motors 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 CFO 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."

Meanwhile, GM competitor Stellantis on Wednesday did not give an estimate for the financial hit it expects this year from the shortage and said the issue could last into the second half of 2021.

While reporting quarterly results, Stellantis said the chip shortage could weigh on 2021 earnings and CFO Richard Palmer told analysts on a conference call the financial impact was a "big unknown." 

CEO Carlos Tavares said the automaker was working hard to find alternative chip supplies, but he was "not so sure" the issue would be resolved by the second half of 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, Kan., 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.

The automaker 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 percent 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 U.S. 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.