General Motors is hoping to establish close relationships with chip suppliers in order to avoid another semiconductor shortage in the future.
Speaking at a Deutsche Bank conference this week, GM Chief Financial Officer Paul Jacobson said the automaker is looking at signing longer supply contracts with chip makers in the future and also establishing a stronger relationship with chip and silicon wafer suppliers. This, the automaker hopes, will avoid another shortage in the future akin to the one it is currently facing.
“Whether we work with foundries to give longer-term commitments or we look to partnering with folks, we’re looking at all aspects of the supply chain to really ensure that something of this magnitude as it relates to chips doesn’t happen again,” Jacobson said, as quoted by Reuters.
The Detroit Big Three have taken the brunt of the impact of the chip shortage. As of May 24th, GM had lost production of 278,000 units of volume due to the chip shortage, while import rivals like Subaru had only suffered a hit of around 45,000 units. The automaker predicts the shortage will trim $1.5 to $2 billion from its net earnings for 2021.
GM has been able to mitigate the effects of the chip shortage by funnelling the majority of its chip supply to plants that build its highly profitable line of full-size trucks and SUVs. It has also started building some truck models without Active Fuel Management (AFM) and Dynamic Fuel Management (DFM) in order to reduce the number of chips it uses per unit.
“By taking this measure, we are able to meet the strong customer and dealer demand for our full-size trucks as the industry continues to rebound and strengthen,” GM spokeswoman Michelle Malcho told Reuters in March.
Due to the chip shortage, certain GM dealerships have been running on tight inventories in recent months. As of April, the automaker’s total inventory had shrunk by more than 50 percent due to production setbacks, falling from 668,443 units to 334,628 units year-over-year.