General Motors said Thursday it is now able to increase vehicle deliveries to its dealers and customers in the United States and Canada despite a massive shortage of semiconductor chips, and that means most of its U.S. assembly plants will not take traditional summer shutdown.
Shipments of Chevrolet Colorado and GMC Canyon midsize pickups built at Wentzville Assembly in Missouri will increase by about 30,000 total units through the week of July 5. Other vehicles are expected to see more deliveries to dealers soon, too.
GM said it is increasing production of the Chevrolet Silverado heavy-duty and GMC Sierra heavy-duty full-size pickups at Flint Assembly by about 1,000 pickups per month beginning in mid-July.
GM said it is able to do this, despite an ongoing shortage of semiconductor chips used in car parts including electrical systems, because the employees at Flint Assembly have come up with ways to improve efficiency on the production line.
While GM is able to increase vehicle shipments to dealers, this will not mean a return to normal levels of inventory.
“The global semiconductor shortage remains complex and very fluid, but the speed, agility and commitment of our team, including our dealers, has helped us find creative ways to satisfy customers,” said Phil Kienle, GM vice president of North America Manufacturing and Labor Relations. “Customer demand continues to be very strong, and GM’s engineering, supply chain and manufacturing teams have done a remarkable job maximizing production of high-demand and capacity-constrained vehicles.”
‘Help is on the way’
Demand for the chips, which are made mainly by a few big suppliers in Taiwan, has been strong, in part, because of COVID-19 supply chain disruptions and an increased use of laptop computers, 5G phones and other IT equipment that also use the chips.
GM has started to complete production on the thousands of midsize pickups that were partly built and held for parts that required semiconductor chips.
To be clear, GM said this does not mean it found a bunch of chips. Rather, it is reflective of GM’s process known as “build shy,” which means building as much of its vehicles as it can, less the chips.
More:GM build-shy strategy has tens of thousands of vehicles parked awaiting chip parts
GM has been storing tens of thousands of incompletely built pickups, SUVs and vans in Michigan, Indiana, Illinois, Missouri, Texas and Mexico.
For example, GM has parked thousands of incomplete SUVs from its Lansing Delta Township plant at a parking lot it leased from Michigan State University until the parts with chips arrive to finish the vehiclesand ship them.
“This was the intended plan all along,” said David Caldwell, GM spokesman. “But the way we managed the supply and shortage was, we set aside those vehicles and with weeks and months of planning, we accounted for when they’d be updated and shipped. We’re telling our dealers now that help is on the way.”
Flint’s faster line speed
Flint Assembly is running three shifts a day, six days a week and working one shift on two Sundays out of the month to meet demand for the heavy-duty pickups, said Eric Welter, shop chairman for UAW Local 598, which represents hourly workers at the plant.
“We were already on production target. But every year we go through productivity improvement,” Welter said. “We increased line speed and that increase will equal 1,000 more pickups built a month.”
Speeding up the line to build another few pickups each hour is “a little bit” taxing on the current workforce, Welter said.
“We’re not adding workers to do that, so we have to shift some people around the plant,” Welter said.
At Flint, about 1,050 pickups are built each day, an extra 700 are built during the two Sundays a month.
But GM is making sure to direct all chip parts to Flint to keep it running, he said.
“I don’t have tomorrow’s parts in stock today, but every day we get them in,” Welter said. “They keep coming through for us.”
Dealers tempered enthusiasm
For GM dealers, it’s welcome news, though with some reservations.
“This is great,” said Lynn Thompson, president of Thompson Buick GMC Cadillac in Springfield, Missouri. “I need them so bad. I’ve got 20 some new cars on the ground. That’s all. I normally have 250.”
Despite that tight inventory, Thompson said he sold about 370 new Buick, GMC and Cadillac vehicles in April and May, double what he’d normally sell.
He was able to do that by aggressively preselling vehicles, taking no down payments, and then delivering the new cars to customers right off the delivery trucks.
“In a meeting yesterday, GM said June may be the worst month,” Thompson said, noting GM told dealers it is not sure how many new cars it can produce this month.
“But from now on, it’ll get better, they said,” Thompson said. “GM is trying to get them out, but if they don’t have chips, they don’t have chips.”
At Matick Automotive Group in Redford, Paul Zimmermann, vice president and owner, said any news that GM is shipping vehicles and ramping up production is good, but, “it’s just a matter of numbers. If we have 75 that were build-shy, will we get five or 75? That’s the question. So, it’s tempered enthusiasm until we see higher volumes coming in.”
GM confirms that production at “certain manufacturing facilities in North America, Asia and South America” will continue to be affected by the chip shortage through June and July. As global semiconductor supply recovers, it will implement similar actions in other markets to resume production and increase deliveries to dealers through the second half. GM continues to work with its suppliers and policy leaders to develop long-term solutions to the supply issues.
No summer downtime
Smaller volumes of vehicles held at other plants also will be completed with semiconductor chip parts. They will ship to dealers during June and July. Caldwell said, without providing specifics.
Most U.S. assembly plants that build GM’s most in-demand, highly profitable products will not take any dedicated vacation downtime this summer, said Caldwell. Fairfax Assembly in Kansas, where GM builds the Chevrolet Malibu sedan and Cadillac XT4 SUV, remains down due to the chip shortage as is CAMI in Canada, Caldwell said.
At CAMI in Ingersoll, Ontario, Canada, GM builds the Chevrolet Equinox SUV. Also remaining down, until June 21, is Lansing Grand River, where GM builds the Cadillac CT4, Cadillac CT5 and Chevrolet Camaro.
More:GM to idle Lansing plant due to semiconductor chip shortage
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In May, GM said it will return full-size light-duty pickup production to Oshawa Assembly in Canada during the fourth quarter. GM said that Oshawa will begin hiring about 1,700 people at the plant “soon.” It will bring new workers on sooner than expected allowing for a faster start of production, Caldwell said. That accelerated timeline and incremental volume will make an impact in 2022, as production ramps up.
The UAW did not respond to a request for comment to the news.
In a statement, Unifor, which represents Canadian autoworkers, emphasized a need for locally resourced vehicle supplies and said: “This is an incredibly difficult time for our members who would otherwise continue to build high-quality in-demand vehicles without delay. We are optimistic that the situation will improve, especially with the return of vehicle production to GM Oshawa.”
Beyond GM’s ongoing efforts to prioritize semiconductor usage, its successful solutions have allowed it to maximize the utilization of chips to pull ahead some projected semiconductor deliveries into the second quarter.
GM said it now expects its first-half financial results to be “significantly better than the first-half guidance previously provided.”
GM will share additional information during its second-quarter earnings conference call on Aug. 4.
CEO Mary Barra and Chief Financial Officer Paul Jacobson participated in a Virtual Fireside Chat with Credit Suisse on Thursday.
“I just can’t underestimate the fluid nature of the situation,” said Jacobson during the chat in regard to the semiconductor chip shortage, saying supply likely won’t return to normal until later this year or early next year.
“We largely expect most of these vehicles would be cleared from lots by the end of the year,” Jacobson said. “We see some chips coming in better than we thought and some deferring out further than we thought. We manage through that situation. But we’re not ready to say unequivocally that we’re through the woods yet.”
But Barra added, “It’s the strength of our team how they’re managing this and finding solutions that gives Paul and I optimism that we’re getting through this.”
More:Chip shortage makes finding perfect car a challenge but could help get you out of a lease
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.