Car prices surge as GM shuts more plants during chip shortage

General Motors is temporarily shutting down more auto plants, leading to tight inventories at dealerships and higher prices for customers. The global chip shortage is to blame.

The company announced it would shut production at two US plants — in Spring Hill, Tennessee, and Lansing Delta Township, Michigan, in the coming weeks. GM also extended shutdowns at the Fairfax Assembly plant in Kansas City, Kansas, and the CAMI plant in Ingersoll, Ontario, which have both been idled since February 8. And it will continue the shutdown at the Lansing Grand River assembly plant, which has been down since March 15.

In addition, GM is halting Chevrolet Blazer production at the Ramos Assembly plant in Ramos, Mexico, during the week of April 19, although that plant will continue to build the Chevy Equinox.

GM is bringing some plants back online as it tries to avoid shortages of certain vehicles in its dealer inventories. The assembly plant in Wentzville, Ohio, which makes midsize pickup trucks, will resume production this coming Monday. It has been down since March 29. And this past Monday, the plant in San Luis Potosi, Mexico, restarted production of Equinox and GMC Terrain.

But supplies of vehicles at dealerships are getting extremely tight, according to industry experts. GM reported last week that its inventory of vehicles at the end of March was down 18% from the end of 2020.

“We are seeing levels of … inventory tightness that goes beyond anything we have ever seen,” wrote Morgan Stanley auto analyst Adam Jonas in a note to clients Thursday. He said that for some vehicles, customers are having to pay above sticker price, rather than less than sticker price.

The chip shortage has become a growing problem for major automakers around the world, with plants in North America, Asia and Europe all temporarily shutting down production.

Automakers cut back computer chip orders early last year when the pandemic caused temporary plant closures and slammed the brakes on auto sales and production. Electronics manufacturers, which enjoyed strong sales during the pandemic, happily snapped up the excess supply.

But when car sales bounced back sooner than expected, it left the industry struggling with a chip shortage.

GM has already warned that full-year income could be cut by between $1.5 billion to $2 billion because of the chip shortage. It said these latest plant shutdown plans are in line with that earlier profit guidance.