General Motors extends plant shutdowns over shortage of semiconductor chips

*Experts indicate the chip shortage is expected to result in a staggering $60.6 billion revenue loss in the automotive industry in 2021, as the semiconductor chip shortage negatively impacts automakers’ earnings

Emmanuel Akosile | ConsumerConnect

In a strategic move to ensure there are enough chips to use in the production of its most ‘in-demand’ full-size pickup trucks and SUVs, General Motors (GM) has announced that it is extending its plant shutdowns resulting from the ongoing global semiconductor chip shortage.

It was gathered that plants will remain shut down at GM’s car and crossover plants in Kansas, Mexico, and Ontario, Canada.

Initially, they were slated to remain closed until mid-March 2021.

The San Luis Potosi plant in Mexico will now be shuttered through the end of March, while the US and Canada plants will remain closed until at least mid-April, GM said in a statement Wednesday.

The automaker disclosed the move is intended to ensure that there are enough chips to use in the production of its most ‘in-demand’ full-size pickup trucks and SUVs.

The statement noted: “GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs for our customers.

“GM has not taken downtime or reduced shifts at any of its truck plants due to the shortage.”

For now, report indicates that chip shortage is affecting some automakers’ earnings.

The chip shortage has been blamed on the economic effects of the COVID-19 pandemic, and it has had a major impact on automakers, according to report.

Last month, GM and Ford announced that they would produce fewer cars and trucks due to the shortage.

The chip shortage is expected to result in a staggering $60.6 billion revenue loss in the automotive industry as a whole this year, according to estimates from consulting firm AlixPartners.

Experts said the shortage was caused by the US rapid economic recovery during the pandemic.

At the start of the pandemic, however, semiconductor makers scaled back production in anticipation of a steep drop in demand, report added.

Demand did decline at first, but the auto industry ended up recovering quickly when consumers adapted to online car shopping and purchases.

When auto plants reopened, they quickly ran out of the semiconductor chips.

Paul Jaconbon, GM’s Chief Financial Officer, said the chip shortage is improving. However, the company is still expecting the delays to lower its free cash flow by $1.5 billion to $2.5 billion in 2021.

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