Afternoon Coffee: GM to halt production at more plants over global chip shortage; Positive job report not enough for the Fed to ease stimulus; Companies look to avoid geopolitical risk from supply chains

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General Motors announced Thursday that it will halt production at several of its North American factories and extend shutdowns at others as a result of a protracted shortage of semiconductor chips that's affecting manufacturing worldwide, according to the Wall Street Journal.

The automaker said three plants that were previously unaffected by the chip shortage will now be idled or have their output reduced for one or two weeks. These include a factory in Tennessee and one in Michigan that make popular midsize sport-utility vehicles — such as the Chevrolet Traverse SUV, and the Cadillac XT5 and XT6 SUVs. GM will also extend closures of a Kansas City-area factory and a plant in Ontario until May 10.

“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products,” a company spokesman told the WSJ. So far, GM has been able to avoid halting production at the factories where it makes the company’s largest pickup trucks and SUVs, he said.

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GM's news comes amid other efforts to blunt the effects of the semiconductor shortage. The Alliance for Automotive Innovation (AAI) asked the federal government to help fund an expanded manufacturing capacity that will support the auto industry, according to Supply Chain Dive. In a letter to the Department of Commerce, the automaker and supplier industry group’s CEO, John Bozzella, said aid would “mitigate the risks to the automotive supply chain evidence by the current chip shortage.”

Positive March job report not enough for the Federal Reserve to ease stimulus

The US job market made a lot of progress in March, but the improvement was only an incremental step toward the Federal Reserve’s threshold for beginning to rein in its support for the economy, according to Reuters.

The unemployment rate sitting at 6% is more than 1.5 times above the lowest levels seen last year, just before the Covid pandemic hit. Other factors that policymakers consider in their analysis of the job market are farther from their stronger readings as well, the article said.

Meanwhile, the employment-to-population ratio sits at 57.8%, nearly 7 percentage points lower than its peak reading of 64.7% in April 2000 and more than 3 points below where it was before Covid hit. It represents about 8 million adults not in jobs.

This is unlikely to represent the “substantial further progress” toward labor market improvement that the Fed said must happen before it discontinues its $120 billion in monthly bond purchases or raises interest rates.

“We need more of those kind of job reports coming out to actually make more progress than we’ve seen thus far. … I think we need to be very deliberately patient in our approach to monetary policy,” Cleveland Fed President Loretta Mester said on CNBC, Reuters reported.

Samsung product an example of companies trying to cut geopolitical risk from supply chains

Samsung recently unveiled new copper foils that are 50 times thinner than a strand of hair and critical to producing computer chips. The moment was a decade in the making and evidence of a growing trend of companies trying to cut geopolitical risk from their supply chains, according to the Financial Times.

Samsung worked with Illgin Materials to develop the technology to produce ultra-thin copper after an earthquake and tsunami in Japan in 2011. The disaster and disruption highlighted an over-reliance on a Japanese group. Illgin’s new product shows a reduction of South Korea’s dependence on components and materials from Japan — a country which Koreans hold historical grievances, the article said.

The development is part of a wider trend of challenges reshaping supply chains worldwide. Companies everywhere are trying to cut their exposure to geopolitical tensions, while governments try to focus on domestic production by onshoring manufacturing, the article said.

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