GM announced that it would be extending production cuts on production cuts further in three plants in North America and adding a fourth to the list of factories affected by the global semiconductor chip shortage. However, these cuts don’t change the fact that the deficit could cost GM up to $2 billion of its year’s earnings.
Paul Jacobson, General Motors’ CFO, stated that by the second half of the year, chip supplies should have returned to their standard rates; he also made it clear that he was optimistic that the profit hit wouldn’t aggravate.
The impact on volumes or parts such as the engine light or specific suppliers that were affected by the chip shortage was not disclosed by the U.S. automaker, but they mentioned that they plan to recover as much of the lost output as they could.
GM spokesman, David Barnas, said, “GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs. We contemplated this downtime when we discussed our outlook for 2021.”
Stellantis Automotive, GM competitors, failed to assess the financial hit that it anticipated from this year’s shortage but started that the problem could creep into the second half of the year.
On a conference call with analysts, the CFO Richard Palmer referred to the financial impact as a “big unknown.” Stellanis’s CEO Carlos Tavares said that even though they can’t be certain that they would fix the issue by the second half of the year, the automaker was relentlessly working towards allocating substitute chip supplies.
Automakers around the globe have been hit by chip storage. It arises from a convergence of aspects like carmakers who closed down their plants for approximately two months during the COVID- 19 pandemics in 2020, which left them competing for chip supplies alongside the sprawling consumer electronics industry.
Since consumers stocked up on; electronic products, laptops, and gaming consoles, the availability of chip supplies has deteriorated. Additionally, there was a higher and unexpected purchase of cars last spring than expected by industry officials, which strained supplies further. This impact is seen on various other industries, such as mobile car repair, local mechanics, and aftermarket part vendors.
Ford Motor Co. also highlighted that the lack of chips could cut the company’s production by 20% in the first quarter of the year, which could cost them up to $2.5 billion. Due to this, it cut production on the F-150, which was its top-selling pickup truck. Other automakers like; Hyundai Motor Co. and Toyota Motor Corp. stock pulled ahead of the shortages to avoid extensive cuts.
Martin, a local mechanic, complains the shortage has also affected his business ”The semiconductor (microchip) shortage is disrupting the car repair industry and also our profits. Car replacement parts are now too expensive, and we end up losing customers daily”
Some politicians are teaming up with industry officials in pushing the administration of U.S. President Joe Biden to take up an active role in the handling of chip storage.
Biden made a statement saying he would seek $37 billion to supercharge chip manufacture in America. A review of supply chains initiated an executive order for critical products such as; rare earth minerals, semiconductor chips, and electric vehicle batteries.