GM cutting production at several factories due to lack of chips

DETROIT – General Motors is temporarily down or extending shutdown in several North American factories due to a continuing shortage of semiconductor chips affecting the global auto industry.

Temporary plant closures range from one to two weeks to a few additional weeks for plants that have already been slowed down due to interruption of parts.

The cost of the closures was included in the company’s earnings forecasts for that year, according to GM. The builder expects the problem to reduce its operating profit by $ 1.5 billion to $ 2 billion this year.

“We continue to work closely with our supply base to find solutions to the requirements of our semiconductor suppliers and to mitigate the impact on GM,” GM said in an email. “Our intention is to compensate as much production lost at these factories as possible.”

Semiconductors are key components used, among others, in infotainment, power steering and braking systems. As more factories shut down last year because of Covid, suppliers have shifted semiconductors away from carmakers to other industries, creating a shortage after consumer demand returned stronger than expected.

The GM plant in Spring Hill, Tennessee, will close from Saturday until April 23, according to a message from the United Auto Workers union to the workers obtained by CNBC. The factory builds the GMC Acadia and Cadillac XT5 and XT6 crossovers. GM has confirmed the shutdown.

In addition, GM said another crossover plant producing Chevrolet Traverse and Buick Enclave near Lansing, Michigan will be at rest on April 19 and production of Chevrolet Blazer at a factory in Mexico will be canceled that week.

The company is also extending downtime to plants in Kansas and Canada that produce cars and crossovers until mid-May. They produce the Chevrolet Malibu sedan and the Equinox and Cadillac XT4 crossover. Another factory in Lansing that produces Chevrolet Camaro and Cadillac CT4 and CT5 also had periods of downtime extended by two weeks until the first week of May.

For months, GM has been prioritizing assembling high-margin vehicles, such as large pickups, by reducing the production of cars and crossovers. The company is partially building pick-ups for completion and delivery at a later date.

GM has been forced to cut production of medium-sized Chevrolet Colorado and GMC Canyon pickups for two weeks. Production of smaller trucks is scheduled to restart on Monday, according to GM.

The consulting firm AlixPartners estimates that the chip deficit will reduce revenues from the global automotive industry by $ 60.6 billion this year.

GM said it expects to earn $ 10 billion to $ 11 billion, or $ 4.50 to $ 5.25 per share, in adjusted pretax profits this year. It projects an adjusted free cash flow of $ 1 billion to $ 2 billion for its automotive division in 2021. It predicts the factor in the potential impact of the chip deficit, including a success of $ 1.5 billion to $ 2.5 billion at its free cash flow.

Chief Financial Officer Paul Jacobson said last week that he was “increasingly confident” that the carmaker would meet its profit targets for this year, despite the plant closing.