General Motors extends plant shutdowns due to chip shortage

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The semiconductor chip shortage is continuing to take a toll on automakers’ earnings

General Motors (GM) has announced that it’s extending its plant shutdowns due to the ongoing global semiconductor chip shortage. 

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. The San Luis Potosi plant in Mexico will now be shuttered through the end of March, while the U.S. and Canada plants will remain closed until at least mid-April.

The automaker said 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. 

“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,” the company said in a statement on Wednesday. “GM has not taken downtime or reduced shifts at any of its truck plants due to the shortage.”

Chip shortage affecting 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. Last month, GM and Ford announced that they will 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 nation’s rapid economic recovery during the pandemic. At the start of the pandemic, semiconductor makers scaled back production in anticipation of a steep drop in demand. 

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. 

Last week, GM’s chief financial officer Paul Jaconbon 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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