General Motors halted its pickup production as the global computer chip shortage continued. As a result, GM will pause the manufacture of most of its full-size pickup truck lineup for at least a week beginning Monday. This is another sign of the supply chain issues hounding the entire world that can trace its cause to COVID-19.
Supply Chains In Chaos
Pickups and SUVs are the most profitable and popular vehicles for General Motors. The American automotive company is continuously trying to maintain production operations, but the chip shortage, coupled with the recent surge in COVID-19 cases, is shutting down plants.
In particular, the surge in Delta variant cases, which now account for more than half of all new cases in the US, are adding more fuel to the fire. Governments are on the verge of reimposing shutdowns and restrictions once again.
GM said that “These most recent scheduling adjustments are being driven by temporary parts shortages caused by semiconductor supply constraints from international markets experiencing Covid-19-related restrictions. We expect it to be a near-term issue.”
However, the company will halt production for a week beginning July 26 at its Fort Wayne, Indiana, assembly plant. The plant manufactures large pickups like the Chevrolet Silverado 1500 and GMC Sierra 1500 models.
In addition, the company will also reduce shifts from three to one at its Flint, Michigan assembly plant during the same week. Flint builds the heavy-duty models for both Silverado and Sierra. Then, GM will shut down its Silao assembly plant in Mexico. Silao produces the Silverado 1500 Cheyenne and Sierra 1500 for the Mexican market.
Chip Shortage Affects Entire Industry, Not Just GM
The ongoing chip shortage and other supply issues aren’t just a GM problem. Other auto manufacturers are running into the same supply issues and closing plants.
This includes Toyota, who shut down three plants in Thailand as well as its Japanese facility due to supply chain shortages. Honda will also shut down its Japanese plant soon.
The chip shortage began a while back, starting over a year ago. When car sales dried up during the first months of the lockdown, many suppliers cut back on their production in order to save money.
Many of the suppliers didn’t expect the complete return of demand so soon. However, a combination of low-interest rates and a flood of stimulus money reinstated demand immediately.
Sales Rebounded Faster Than Expected
As a result, sales rebounded faster than expected. However, suppliers could not come up with enough parts for car companies to fill their orders. Consequently, the industry will need to cut production by 3.9 million vehicles worldwide in 2021.
This translates into a potential $110 billion in lost revenue this year, according to an AlixPartners study.
Watch the Bloomberg Markets and Finance video reporting that Global Chip Shortage May Last Through Into 2022: Bain & Co.:
Did you buy a new vehicle this year or last year? What made you buy at this point? What do you think about the looming shortage of vehicles this year?
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