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GM latest to cut production due to shortage of computer chips

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Cadillac

General Motors has joined a growing list of global auto companies that have had to pause or slow production of a number of their vehicles due to a shortage of computer chips.

The chips, often made in Taiwan, control many of the functions of a modern car, including starting the engine, the infotainment system, electronic steering and electronic braking.

Michelle Krebs, a senior analyst with Autotrader, says more and more computer chips are being added to vehicles as auto manufacturers add features like emergency braking systems.  

And she says suppliers of the chips mistakenly believed the pandemic would shrink demand for the devices for a longer period of time.

"Nobody realized that the auto industry in particular was going to bounce back so quickly," she says.

Krebs says other factors responsible for the shortage include chip manufacturers rushing to meet the demand caused by global increases in sales of home computers because of the pandemic, along with trade barriers created during the Trump administration.

The Biden administration is expected to urge Taiwanese authorities and major chip manufacturers to address the shortage as swiftly as possible.

Alix Partners, a consultant firm, estimates the shortage could cost global automakers a combined $61 billion in 2021.