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General Motors Extends Production Cuts Due to Chip Shortage

General Motors extended production cuts at three North American plants until at least mid-March due to the worldwide semiconductor shortage.
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General Motors  (GM) - Get General Motors Company Report said Tuesday that it was extending production cuts at three North American plants until at least mid-March due to the worldwide semiconductor shortage.

Shares of the Detroit automaker at last check were off 1.4% to $56.11. The company is scheduled to report earnings on Wednesday.

GM said it was extending the shutdown in Fairfax, Kan., Ingersoll, Ontario, and San Luis Potosi, Mexico. 

The company said on Feb. 3 that all three facilities would shut down for a week due to the microchip shortage.

Some vehicles will be built without certain modules and then completed when semiconductors become available, GM said.

"Semiconductor supply remains an issue that is facing the entire industry," GM spokesman David Barnas said. "GM's plan is to leverage every available semiconductor to build and ship our most popular and in-demand products."

GM said its supply-chain organization is working closely with its supply base to find solutions for the company's suppliers’ semiconductor requirements and to mitigate impacts on GM.

The company said "its intent is to make up as much production lost at these plants as possible."

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"We will work through this situation, and it does not change the strong underlying performance of the company, our growth agenda or our commitment to an all-electric future," GM said.

The semiconductor sector has felt the impact of the coronavirus pandemic shutdown, as auto production slowed down and car sales dropped.

Japan's second and third largest automakers, Honda Motor  (HMC) - Get Honda Motor Company Ltd. Report and Nissan Motor NSANY, will sell a combined 250,000 fewer cars in the current financial year as a global shortage in chips hits production, Reuters reported.

As auto factories reopened, customer demand for cars accelerated.

In addition, demand for chips increased as consumers, who were homebound due to the outbreak, bought laptops, TVs, and other devices.

Separately, Barclays analyst Brian Johnson raised his price target on GM to $64 from $56, while keeping an overweight rating on the shares. 

Johnson said that while lithium-ion-battery technology is increasingly becoming the "clear winner" in the passenger-car market, he sees "at least some potential" for hydrogen fuel cells to be an important propulsion for the parts of the medium and heavy-duty truck market. 

The analyst said GM created a new unit, GM Hydrotec, to market this technology and has struck alliances with Navistar International  (NAV) - Get Navistar International Corporation Report and Nikola  (NKLA) - Get Nikola Corporation Report for commercial trucks, as well as Honda for passenger vehicles.