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September 20, 2021 10:15 AM, EDT

GM Plans ‘Substantial Shifts’ in Supply Chain as Chip Shortage Persists

GM sign Matt Rourke/Associated Press

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General Motors Co. is planning to revamp its supply chain as the pandemic-triggered chip shortage and rising demand for chip-intensive vehicles have demonstrated the need for an overhaul.

The Detroit-based carmaker will make “substantial shifts” in its supply chain, CEO Mary Barra said Sept. 17 in a live-streamed discussion with Delta Air Lines Inc. CEO Ed Bastian. While GM generally doesn’t buy chips directly, the company is now “building direct relationships” with manufacturers.

“It’s a solvable problem, but it’s going to be here a little longer,” Barra said.

GM CEO Mary Barra

Barra

The semiconductor shortage reflects idiosyncrasies of the global economy in the pandemic and planning decisions made by automakers in the early days of the crisis. But, Barra said, the challenge is also demand-based, with a shift in consumer preferences for vehicles that are becoming more of a software platform.

“We didn’t estimate demand right at the beginning; we’re long past that now even with the long lead time with chips,” Barra said. Demand for vehicles would be higher if the company had enough chips right now, she said.

GM has been working deeper into the tiered supply chain as it seeks a longer-term solution to shortages, Barra said. As the semiconductor crunch persists, automakers are building closer ties with chip companies such as Intel Corp., Qualcomm Inc. and Nvidia Corp. to monitor supply.

U.S. production of new vehicles this fall will continue to be constrained by the chip shortage and the spread of COVID-19 in Southeast Asia. On Sept. 16, IHS Markit slashed its vehicle production forecast for this year by 6.2%, or 5.02 million vehicles, the biggest decrease to the outlook since the chip shortage emerged.

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