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GM cuts production at two plants as pandemic squeezes supply chain

With new outbreaks spreading worldwide, industry officials fear the global supply chain could disrupt auto production on a more frequent basis in the weeks to come.
The General Motors world headquarters office is seen at
The General Motors world headquarters office at Detroit's Renaissance Center on July 31, 2019.Paul Hennessy / LightRocket via Getty Images file

General Motors was forced to curb production at two of its key assembly plants on Thursday and Friday due to parts shortages caused by the coronavirus pandemic — and industry observers fear that more disruptions could follow as the rate of Covid-19 infections surges to record levels.

Overtime work scheduled for Saturday at GM’s big SUV plant in Arlington, Texas, has been canceled, the automaker announced, while the Corvette plant in Bowling Green, Kentucky, was forced to temporarily shut down on Thursday and Friday. GM had been pressing to boost production at both factories to cope with shortages resulting from the industry’s two-month shutdown last spring.

“We’re going to see other plants hit by this,” warned Carla Bailo, the CEO of the Center for Automotive Research in Ann Arbor, Michigan.

The auto industry has been hit hard by the pandemic. Sales in March and April fell by more than one-third as much of the country went into lockdown. A two-month factory shutdown worsened that situation, leaving dealers with supply shortages, just as new vehicle demand is surging.

Automakers such as GM are following strict new protocols aimed at reducing the risk of infections on the factory floor — including the use of personal protective equipment, social distancing and apps aimed at keeping those already infected from reporting to work.

But such steps have made it difficult to get back to normal levels of production and begin to rebuild vehicle stocks. “Inventory levels will remain lower” than a year ago through at least the end of 2020, Acting GM Chief Financial Officer John Stapleton said during a conference call last week.

Other automakers, including Toyota, have issued similar advisories in recent weeks and they say the situation is complicated by the industry’s dependence upon outside parts suppliers, many of whom are struggling financially and can’t match the strict Covid-19 protocols put in place by automakers.

GM hasn’t said where the bottlenecks hitting the Kentucky and Texas plants have occurred but several industry insiders pointed to challenges being faced in Mexico, where Covid-19 infection rates have been surging. The states of Durango and Chihuahua have declared red alerts and enacted mandatory restrictions that impact manufacturing operations there.

There are new outbreaks spreading worldwide, so industry officials fear that with automakers depending on a global supply line, operations could be disrupted on a more frequent basis in the weeks to come.

A GM statement stressed that the Kentucky and Texas plants are only temporarily affected, adding that the company will “continue to work closely with our suppliers to minimize any parts disruption.”

But, if the situation worsens, shortages of new vehicles could short-circuit efforts to get the auto industry sales rebound — and financial recovery — back on track, in turn leading to new job cuts.