GM to Halt Production at Several North American Plants Due to Chip Shortage
Due to a chip shortage, General Motors Co. is stopping production at many North American factories and others are shutting down. GM also mentioned that three of their plants previously nonaffected by supply issues are going to be idled or have reduced output for up to two weeks. The models affected are popular midsize sport-utility vehicles. They include the Chevrolet Traverse SUV and the Cadillac XT5 and XT6 SUVs. Not only is GM dealing with chip shortages, but also at almost every major car company.
The chips are important because they are put in software modules that controls anything from brakes to dashboard touch screens. Executives from Auto makers are predicting the shortage could last several more months and will continue to have to cut production. Not only is the chip shortage affecting the auto industry, but products like video games. Also, it is one of the reasons for backups at California ports, plant closures due to the Texas freeze and the ship stuck in the Suez Canal recently.
President Biden met with a group of lawmakers to address the issue and top administration officials are going to meet next week. Despite low discounts on cars, U.S. vehicle sales in March was the second-highest level ever for that month. According to a dealership owner in southeast Michigan, customers are willing to pay more because they are getting more for their used vehicles. Dealerships have seen business increase as the restrictions decrease. However, the chip shortage reduced vehicle selection to 10% which will lower sales. GM has estimated the chip shortage will cost them up to $2 billion on pretax profit and $2.5B for Ford.
The chip shortage has caused temporary layoffs of thousands of workers. They are entitled to unemployment aid and supplemental pay under the union’s labor contract.