GM shuts down car plants due to chip drought

3 September 2021

General Motors (GM) has become the latest carmaker to fall victim to the semiconductor shortage after announcing it will be shutting half its plants in North America.

The carmaker said four plants in the US, three in Mexico and one in Canada would close for up to two weeks, out of a total of 15 across North America.

Ford has also announced it will suspend making pickup trucks at its Kansas City Assembly Plant for the next two weeks. In August Toyota said it would cut September production by 40%.

The cuts mean US car production has dropped 72% year-on-year, with just under 1m new vehicles being built in August 2021 compared to the 3.58m built in the same period in 2019. 

GM said in a statement: “These most recent scheduling adjustments are being driven by the continued parts shortages caused by semiconductor supply constraints from international markets experiencing Covid-19-related restrictions.”

The car manufacturing industry has been hit by a global shortage of semiconductor chips, which are integral for car production. Each car contains around 1,500 chips. 

Semiconductors are also used in the production of electronic devices including computers and gaming devices, meaning the car industry has found itself in direct competition with electronics companies for the chips. 

The world’s biggest semiconductor maker Taiwan Semiconductor Manufacturing Co announced it was raising prices, with chips used in car manufacturing expected to increase by 20%. The rise is due to come into force in January. 

Jennifer Bisceglie, CEO and founder of supply chain tech company Interos, warned the UK government must act to ensure the stability of semiconductor supply chains, saying: “The frequency and severity of these semiconductor supply chain shocks can no longer be considered entirely unpredictable.”

She called on the government and commercial organisations to require transparency throughout their supply chain and ensure operational resilience remains a core business and mission priority.

She said: “Maintaining domestic – or friendly nation – manufacturing capabilities is an essential part of ensuring the semiconductor industry has a highly resilient, geographically diversified supply chain. 

“This allows the many industry sectors that rely upon semiconductors to continue providing their products or services in the face of adverse market or supply chain shocks. 

“The impact of the semiconductor shortage is far reaching, and it is vital that the UK government and private companies tackle the issue head on.”

Geoff Cousins, chairman of quality management expert G&P and former managing director at Jaguar Land Rover, said he expected the semiconductor shortage to persist for the next year. He said it was having a “very real impact on production schedules in the automotive industry, with a knock-on effect to suppliers”. 

Cousins said: “Factors which are beyond the control of suppliers adds to uncertainty as production is ramped up and down. Flexible outsourcing with a trusted partner is a way to fulfil production requirements, while meeting quality standards but avoiding investing fixed costs until a stable production schedule is established.

“Suppliers who have come through a tough financial period caused by the pandemic need to protect themselves from outside influences.”

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