GM seeks more active role in parts sourcing

The coronavirus pandemic and global microchip shortage have made General Motors rethink its strategies for component and material sourcing.

As the chip crisis halts automakers' production lines and depletes dealer stock, GM aims to become more involved in sourcing chips and battery materials to avoid production delays in the future.

"It really is an end-to-end, total value chain look that we're taking to position ourselves for the future," Steve Carlisle, president of GM North America, said during J.P. Morgan's Auto Conference last week. "Partnering makes a lot of sense if we can work that out, but all of that is a live discussion."

Supply chain management has been a concern across the industry as computer chips and other parts have been scarce during the pandemic. AutoForecast Solutions estimates that 5.96 million vehicles have been cut from automakers' worldwide production plans.

Beyond current efforts to prioritize high- margin models for chips, Hans-Werner Kaas, senior partner at consultant McKinsey & Co., said it is "absolutely critical" that automakers and large suppliers invest in predictive technology to secure a more-reliable supply of components years into the future. That may increase spending per part, he said on Automotive News' "Daily Drive" podcast last week, "but it will play out in the long term to securing your growth and your production plans."

GM's days' supply has plunged to the mid-teens because of production delays caused by the chip shortage, Carlisle said.

When output normalizes, GM won't aim for a bloated supply of 90 days that it often had before, he said. Instead, a 30- to 60-day allotment at dealerships would be ideal.

"We can do a lot better business with a lot less complexity from a configuration point of view," Carlisle said.

GM will focus on vehicle configurations that sell fastest, reducing the array of available options and decreasing build complexity. Those vehicles will also require fewer incentives to sell, he said.

"We all love the idea of fast inventory turns, low carrying charges, low incentives, good pricing," Carlisle said.

GM has time to determine the ideal inventory level, Carlisle said, and it has developed tools to help dealers track vehicles in transit and make more-sophisticated ordering decisions in the meantime.

But for now, while working through the chip shortage, GM's primary focus is filling the pipeline while maintaining strong pricing and turning inventory quickly, he said.

"We are going to try to make the most of it," Carlisle said.