GM Shuts Down Plant Operations Due To Shortage Of Chips, How Much Will It Cost?

US automaker General Motors is experiencing a severe shortage of chips. (photo: unsplash)

JAKARTA - General Motors (GM), the parent company of Chevrolet, GMC, Cadillac, and Buick, said it was temporarily halting production at six of its plants in North America. This was done as a result of a global chip shortage that emerged earlier this year. GM's decision proves that the new major automaker has been heavily affected by tight supplies of critical computer chips.

The four US-based GM plants that will be affected are, Fort Wayne, Indiana; Wentzville, Missouri; Spring Hill, Tennessee; and Lansing, Michigan. Four other plants in Mexico and Canada will also be closed for several weeks as GM seeks to shore up its chip supply. The production shutdown will affect GM's most profitable vehicles, including pickup trucks and SUVs.

"During downtime, we will repair and ship unfinished vehicles from many of the affected factories, including Fort Wayne and Silao, to dealerships to help meet strong customer demand for our products", a spokesperson said in an email.

"While the situation remains complex and highly fluid, we remain confident in our team's ability to continue to find creative solutions to minimize the impact on our vehicles with the highest demand and with limited capacity", he added.

Affected vehicles include the Chevy Silverado, Cheyenne, Traverse, Equinox, and Express; GMC Acadia, Sierra, Savana, Terrain, and Canyon; Buick Enclaves; and the Cadillac XT5 and XT6.

This is the second time GM has had to announce a temporary factory shutdown in response to a chip shortage. The automaker, which is North America's largest automaker, previously idled some factories for two weeks in April.

Of course, GM is not alone in feeling the pain of a global shortage of semiconductor chips, which are showing no signs of improvement. Practically every automaker had to cut production and temporarily close factories in response, including Volkswagen, Ford and Toyota.

Even Tesla, which makes far fewer vehicles than most of its competitors, has also said it will have to rewrite its vehicle software to support alternative chips. Tesla CEO Elon Musk said during the earnings call that "the global chip shortage situation remains quite serious".

During the recent earnings report, GM executives would not specify how much production they expect to lose due to chip shortages. But CEO Mary Barra said purchasing, manufacturing, engineering and sales teams are working to shift chips away from smaller cars and SUVs to full-size pickup trucks, large SUVs and new electric vehicles.

The company stressed that the shortfall would cost $1.5 billion to $2 billion in pretax revenue this year due to production losses.