General Motors Seeking Long-Term Supply Contracts To Mitigate Microchip Shortage18
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.
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Epic failure by Barra and her executive team not to have agreements in place.
What you mean they did. Just in the wrong places. American companies have too often gone to the cheapest supplier even if it is in countries that are one day going to be in the next waring issues. TSCM they claim makes what 50%+ of the world chips for those that dont own fabs ex Intel? All we need now is China moving on Tawain and watch how badly things get. They should have had agreements from several sources during the good times. Its too late to rush in new ones….hopefully it all works itself out. Imagine now if supplies out of China that many may be relying on whether for finished product or ingredients others need to make the product are intentionally being held back.
GM had a plant in Kokomo Indiana, a former Delco Electronics plant that could have made these parts and could have been reactivated, but the decided to put money in Mexico. They can put a ventalator factory together in 3 or 4 weeks but they can’t put a resistor assembly plant together?
That’s GM logic for you.
Won’t feel bad when they are pushed into bankruptcy.
Because first, the machines needed to make these chips take 3-4 years from date of order to delivery, in normal times. Second, the processes needed to make modern semiconductor chips are highly proprietary, and only two companies in the world, TSMC and Samsung, know how to do so. Third, even if you did know, you need PhDs at every step of the processes who continuously monitor and adjust the processes.
A ventilator is a bunch of motors and valves in a plastic case. The chip in your cell phone has structures that are around 50 atoms wide. You can’t compare the two.
Um chips! I dont think so. Your talking finished products that GM uses they probably did NOT make the chips. Chips are the shortage. There are only so many USA companies still making chips and as foundries. TSCM being the largest outside with other ones here.
“General Motors is HOPING to establish close relationships with chip suppliers in order to avoid another semiconductor shortage in the future.”
And exactly WHY was no long-term chip contract not already in place YEARS ago?
And exactly WHO is piloting this ship these days, Alfred E. Newman?
How about building these parts here. With the price of the vehicles, I’m sure they afford it.
So much for the “JUST-IN-TIME” supply chain frenzy of the late 1980’s early 1990’s. Management that thinks up the latest and greatest idea which eventually leads to no parts to be had debacle.
Corporate America management is one of the poorest in the world.
No wonder foreign companies constantly beat us.
GM UAW strike, Covid shutdowns, Supply chain issues, Chip shortage = NO dealer inventory of Silverado, Tahoe, Suburban, and Traverse. And little else for that matter = perfect storm. Perverse lack of allocation means Salesman hardship or loss of talent. Insufficient margin for livable commissions in small car models. Our techs are learning to shoe horses.
What a mess. Even as they get chips in and start installing them in the thousands of cars and trucks
baking in the summer heat all across the country, who’s goin to want a “not exactly new” car or truck
that’s been sitting out in the elements that long. Does the term “Lot Rot” ring a bell ?
I was raised in a GM family. I bought nothing but GM cars all my life, but with the people in charge of GM I don’t see the company being in business in the future. Americans buy new cars. Americans build new cars. With GM investing more money in foreign factories while good factories in the US stand vacant. Open them up, put more Americans to work and build the stupid resistor in america.
Maybe just Maybe, they should build just what people ordered before a bounce of trucks that always sell at a discount, What a joke. No mater what you ordered it should be first in line. Proud Mary should take a hike off a short pier, she needs to wake up. Brand loyalty is going to the way side. The thing she doesn’t get share holder don’t care about her. They only see big money. While the people wait for their car.
Well, they did have a large plant just 6 miles from me called Packard Electric. At one time, they even made all their copper wiring harnesses. I’m sure they could have made their own chips. 17 miles is Lordstown where they are making the new batteries. Yes, at one time, we made everything.
Now we have forgotten how to make things and innovate. It went with outsourcing. A friend runs a CNC shop and they can’t find people who know how to run the machines anymore.
Folks seem to be missing the point. That fingernail size CHIP is one of theeeee missing and key parts. No GM or Ford or any other car company is making their own chips! They are whats needed to finish the part they want to fire up the vehicle with. Heck your probably already hearing about BOARD supply issues which is what these chips are attached too. Now that Delco may have done at one time if not still now where ever in the world.
Funny how so many people think insourcing chip manufacture is the solution. How do you pay for a 20 billion dollar chip foundry making 7 million cars a year with maybe 70 or 100 million chips a year required – you can’t – that would make the chips cost a major portion of the vehicle with just the amortization of the plant’s capital cost. This manufacturing got concentrated too much because chip designers like AMD and Intel thought the investment wasn’t worth it to make their chips – with them needing orders of magnitude more than the auto makers need. My guess is what really happened is some purchase agent who never stepped foot in an assembly plant negotiated a bad deal to save GM fractions of a percent, and as soon as demand went up on chips the manufacturer dumped them. Kinda like when Sears asked for help from suppliers they had beat on for cost savings for decades. The supplier said why should I help you? See you in bankruptcy court…