Engines assembled as they make their way through the assembly line at General Motors (GM) plant in Spring Hill, Tennessee, August 22, 2019.
Harrison McClary | Reuters
DETROIT – General Motors is temporarily inactive or extending shutdowns at several plants in North America due to an ongoing shortage of semiconductor chips impacting the global automotive industry.
The temporary plant closures range from a week or two to a few extra weeks for plants that have already stopped due to the disruption of the parts. GM will also resume production of midsize pickups on Monday after a two-week shutdown due to the shortage at a Missouri plant.
The cost of the closings has been factored into the company’s earnings forecast for the year, according to GM. The automaker 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 for our suppliers’ semiconductor requirements and to reduce the impact on GM,” GM said in an emailed statement. “Our aim is to make up for as much lost production at these factories as possible.”
Semiconductors are key components that are used in, among other things, the infotainment, power steering and braking systems. As several factories closed last year due to Covid, suppliers sent semiconductors away from automakers to other industries, creating a shortage after consumer demand returned stronger than expected.
GM’s plant in Spring Hill, Tennessee, will close Saturday through April 23, according to a notice from the United Auto Workers union to employees obtained by CNBC. The factory builds the crossovers GMC Acadia and Cadillac XT5 and XT6. GM confirmed the shutdown.
In addition, GM said another crossover plant producing the Chevrolet Traverse and Buick Enclave near Lansing, Michigan, will be shut down in the week of April 19, and production of the Chevrolet Blazer at a plant in Mexico will also be canceled that week.
The company is also extending downtime at plants in Kansas and Canada that produce cars and crossovers through mid-May. They produce the Chevrolet Malibu sedan and Equinox and Cadillac XT4 crossover. Another plant in Lansing that produces the Chevrolet Camaro and Cadillac CT4 and CT5 has extended its downtime by two weeks to the first week of May.
GM has been prioritizing the assembly of high-margin vehicles, such as full-size pickups, for months by cutting production of cars and crossovers. The company even partially builds pick-ups to complete and ship at a later date.
GM had to stop production of the Chevrolet Colorado and GMC Canyon mid-size pickups for two weeks. According to GM, production of the smaller trucks will start again on Monday.
Consulting firm AlixPartners estimates that the chip shortage will reduce $ 60.6 billion in revenues from the global auto industry this year.
GM said it expects to make $ 10 billion to $ 11 billion, or $ 4.50 to $ 5.25 per share, from adjusted pre-tax earnings this year. It projects adjusted free cash flow of $ 1 billion to $ 2 billion for its automotive division by 2021. The forecasts take into account the potential impact of the chip shortage, including a $ 1.5 billion hit to $ 2.5 billion for its free cash flow.
GM CFO Paul Jacobson said last week that he was “increasingly confident” that the automaker would meet its profit targets for the year despite the plant’s closures.