SHOPSMART AUTOS – CUSTOMER INFORMATION – JULY 22, 2021 (PT. 4)
GM build-shy strategy has tens of thousands of vehicles parked awaiting chip parts
GM is running what the industry has called a build-shy strategy, where it builds as much of its vehicles as it can, less the parts that require the chips. It is storing tens of thousands of incompletely-built pickups, SUVs and vans in Indiana, Illinois, Missouri, Texas and Mexico, several people familiar with GM’s production told the Free Press. “We’ve been doing (build-shy) for a few months,” said UAW Local 2209 Shop Chairman Rich LeTourneau at Fort Wayne Assembly in Indiana, where GM also builds full-size light-duty Chevrolet Silverado and GMC Sierra pickups. “We have about 15,000 trucks parked now.” GM declined to confirm figures, but said its build-shy strategy benefits customers, dealers and employees because it keeps the assembly lines humming, building its most in-demand and profitable vehicles. But some, including dealers and Wall Street, worry about the impact of the chip crisis on business if it continues much longer. On Wednesday, when GM reported strong first-quarter earnings, GM CEO Mary Barra assured investors that GM is managing the crisis and foresees it resolving during the third and fourth quarters. One thing is certain: The strategy will dictate a new way for GM to work with dealerships that includes fewer cars on lots in the future.
Just in time
Ford Motor Co. is handling the chip shortfall similarly to GM. Ford told industry analysts that the company had about 22,000 vehicles awaiting parts at the end of March. During a first-quarter earnings media call on Wednesday, Barra declined to disclose how many vehicles GM has that are awaiting parts. “The number changes because, as chips become available, we’re working that” to expedite getting the parts to vehicles, Barra said. “What I will tell you is that we do have some vehicles that are in that status. When we have the semiconductor and can insert the module, we’ll do that and then the vehicle will go through a very thorough and rigorous quality testing” before shipping to dealerships. Demand for the chips, which are made mainly by a few big suppliers in Taiwan, has been strong in part because of the COVID-19 pandemic and an increased use of laptop computers, 5G phones and other IT equipment that use the chips. Cars use the chips in a variety of electronics systems. “Building shy only tells investors that there’s potentially a lot of wholesale revenue coming later this year,” said Morningstar analyst David Whiston. “Until GM can build and ship the vehicle, it can’t record revenue though. Wall Street usually likes results, not potential.” GM currently has either stopped production or reduced shifts at six plants in North America because of the chip shortage, including Lansing Grand River Assembly, which will take downtime beginning the week of May 10 through the week of June 28. It will do some limited pre-production of the 2022 Cadillac Black Wing series in June. But other GM plants continue to churn out in-demand vehicles, even if thousands of those vehicles sit on the sidelines awaiting a chip part to finish production. At Flint Assembly, where GM makes its highly profitable heavy-duty full-size Silverado and Sierra pickups, it has had to build-shy about 100 to 150 pickups three times this year, said UAW Local 598 Chairman Eric Welter. The plant got the parts needed to complete those vehicles in less than a week, he said. “GM has done a pretty decent job keeping parts flowing especially at my plant, which has had an advantage and we haven’t had the shutdowns,” Welter said. “They’re moving mountains to make things happen. We get hour-by-hour updates sometimes when they’re running tight.” In mid-March, GM said it will build certain 2021 light-duty full-size pickups without a fuel management module until the end of the model year because of the shortage of chips used in the modules.
Better than not building
Besides the 15,000 light-duty full-size pickups parked at Fort Wayne, LeTourneau said he understands that about the same number were parked at Silao, in Mexico. At Arlington Assembly in Texas, a person familiar with the plant operations told the Free Press there were about 2,000 full-size SUVs awaiting parts. The person asked to not be named because he is not authorized to share that information. “We are running at full speed and putting out around 390 to 425 SUVs per shift,” the person at Arlington said. At GM’s Wentzville Assembly in Missouri, GM had about 30,000 vehicles parked in several areas around the state awaiting parts, said two people familiar with the matter, who asked to not be identified because they are not permitted to share that information with the media. GM makes the Chevrolet Colorado and GMC Canyon midsize pickups and full-size vans at Wentzville. Starting April 26, the plant’s general assembly moved from three shifts to two shifts, GM spokesman David Barnas said. This will last until the plant goes down for its scheduled launch changeover the week of May 24. But GM said it will run midsize pickup production at full volume until the scheduled launch changeover because the stamping, body and paint shops will run on three shifts. Barnas said the build-shy strategy is “better for our customers, dealers and employees at the plant as opposed to not building at all. Importantly, it will help us quickly meet the strong customer demand for our products as more semiconductors become available and we are able to complete the vehicles at the assembly plants and ship to dealers.” Analyst
Whiston said GM has to have those high-profit vehicles to dealerships as soon as it can for the bottom line. “GM needs all the light trucks, especially pickups, it can so plants like the Arlington and Fort Wayne probably will build-shy for a long time,” Whiston said. “GM is prioritizing the vehicles it makes the most money on which is trucks. It’s the best you can do with a bad situation.”
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