General Motors CEO: Chip shortage has forced supply chain rethink

By Robert Scammell

US automaker General Motors will source more semiconductors directly from manufacturers to adapt to the ongoing global chip shortage, its CEO Mary Barra said on Friday.

Barra’s comments came amid ten months of sporadic production line closures in the automotive sector due to the chip shortage and supply chain disruptions. All major automakers have been forced into temporary closures, with General Motors halting production at North American assembly plants earlier this month.

“We’re going to make some pretty substantial shifts in our supply chain,” Barra said in an online interview from a series of CEO discussions. “We’re already working much deeper into the tiered supply base because generally General Motors doesn’t buy chips [directly] but [our suppliers do]. But now we’re building direct relationships with the manufacturers.”

With analysts expecting the shortage to last into 2022 and beyond, executives at consumer and business-to-business manufacturers are exploring ways to minimise disruptions.

According to a GlobalData report, the semiconductor industry is “at the start of a 10-year reset in the wake of the pandemic, geopolitical turmoil, and the resulting global shortage”.

The chip shortage was caused by Covid-19 disruptions but exacerbated by poor weather and fires at semiconductor foundries. Demand for microprocessors is also at a record high as more and more chips are used in products.

“As customer needs are shifting, we need more and more semiconductors,” Barra said, adding that some of GM’s newer cars have up to 30% more chips than other vehicles.

Barra added that the chip supply issue is a “solvable problem, but it’s going to be here a little longer”.

Consumer devices such as smartphones and games consoles have also been affected by chip supply issues.

The US Commerce Department is scheduled to meet with automakers at the White House on Thursday to discuss semiconductor supply chains.

Barra is not the first CEO to call for a fresh supply chain approach in response to the chip shortage.

In May, the CEO of chip manufacturing equipment supplier Applied Materials said the shortfalls showed just-in-time models “may not be the most effective strategy going forward”.

The month prior Jensen Huang, CEO of GPU maker Nvidia, called for a simplification of supply chains in the automotive sector.