General Motors CEO Mary Barra said Wednesday the industry-wide shortage of semiconductor chips will not affect production of GM’s highly profitable pickups and SUVs this year.
It’s a bold statement given that Ford Motor Co. has seen its F-150 production disrupted due to the parts shortage.
Barra said while discussing GM’s annual earnings report that the chip shortfall also will not derail GM from its development of electric vehicles and self-driving cars, in fact the automaker predicts reporting $10 billion to $11 billion in profits for 2021, and that includes a $1.5 billion to $2 billion hit from the chip shortage.
“Rest assured the semiconductor shortage won’t slow our growth plan. We anticipate a strong year ahead,” Barra told reporters.
Her comments followed the automaker’s reporting of strong year-end and fourth-quarter earnings results despite an eight-week production shutdown last year because of the COVID-19 pandemic.
GM reported pretax profits of $9.7 billion for 2020, up from $8.4 billion a year ago. For the fourth quarter, GM’s pretax profits surged to $3.72 billion from $105 million in the year-ago period.
In North America, GM’s pretax profit for 2020 was $9.1 billion, up from $8.2 billion in 2019. For the quarter, it was $2.6 billion up from $263 million a year ago.
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The problem
Last fall, GM and other automakers started to see a shortage of semiconductor chips, which are used in various systems and electronics throughout vehicles.
The reason for the shortfall is that demand for semiconductor chips is up in part because of the pandemic and an increased use of laptop computers, 5G phones, gaming systems and other IT equipment that use the chips. Many analysts expect the shortage to last into the third quarter.
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It has caused Ford to slow production of its popular F-150 pickup among other vehicles. Likewise, GM has three plants down this week because of the problem.
- Fairfax Assembly and Stamping Plant in Kansas City, Kansas: About 2,000 hourly workers build the Chevrolet Malibu sedan and Cadillac XT4 SUV.
- CAMI, Ingersoll, Ontario: About 1,500 hourly workers build the Chevrolet Equinox SUV.
- San Luis Potosí, Mexico: GM builds Chevrolet Equinox and Trax and GMC Terrain SUVs.
Some related GM facilities that supply parts to the plants also are somewhat affected. For example, the engine plant at GM’s Spring Hill Assembly complex in Tennessee has reduced a shift on one engine line this week because GM sends that engine to Fairfax.
More:GM to idle 3 plants in North America due to semiconductor shortage
More:Parts shortage plagues F-150 production; Ford cuts more shifts in Dearborn, Kansas City
In addition, GM will run its Bupyeong 2 assembly plant in South Korea at half capacity for the week. GM builds the Chevy Malibu, Trax and Buick Encore SUV there for sale in the United States.
Stellantis, formerly Fiat Chrysler Automobiles, in January shuttered plants in Mexico and Canada, building the Jeep Compass and Chrysler 300, Dodge Charger and Dodge Challenger. Its Windsor Assembly, where it makes its minivans, is currently down for three weeks.
But most of its North American facilities were running regularly as of early February and the automaker continues to work closely with its global supply chain network to monitor the issue, a spokeswoman said.
Pickups protected
Barra said GM is working to protect its production of pickups and SUVs.
“We’re doing everything possible. We won’t lose any production throughout the year where it relates to pickups and SUVs,” Barra said. “We’re going to be able to meet our production outlook.”
One potential solution if GM does face a chip shortage in modules used in its pickups and SUVs is to build the vehicles, then when the modules become available, assemble them and ship them, she said. But Barra said it is too early to predict whether or when GM would need to do that and how many vehicles it might impact.
“This is an industry-wide issue and there will be variations between automakers and we do have mitigation strategies,” Barra said. “We are working every day with our tier 1, 2, 3 and 4 suppliers. There’s a lot of movement, but it’s working every day on every vehicle and continuing to find solutions in the supply chain.”
Buy direct?
Barra foresees the chip problem resolving later in the year, but stopped short of saying exactly when it will end.
In the near term, GM will focus its efforts on securing chips for the vehicles it knows it can make up production on later in the year and those in highest demand, which are pickups and SUVs.
German automaker Volkswagen is looking into buying its chip supplies directly from manufacturers, Reuters reported earlier this month. Barra said GM is, “open to working vertically within the supply business. We’ll evaluate it, but that’s a mid- to long-term solution. We’ll focus on working deep in the supply base” for the near term.
More:Chip shortage cripples car production into the second half of 2021
Contact Jamie L. LaReau: 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.