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GM reveals hits due to lack of chips, cost increase

General Motors Ltd

GM -8.91%

Revenues were strong in the second quarter, raising full-year earnings forecasts, but said a prolonged shortage of computer chips and rising commodity costs would weigh on results in the second half.

GM’s outlook for profits in the second half disappointed investors. Stock prices fell about 9% on Wednesday. This is the biggest drop last year. Stock prices are strong, rising 39% this year until Tuesday and more than tripled since March 2020.

Negative reactions indicate that after automakers have made significant profits, continued chip shortages and pandemics can still cloud the outlook, making it difficult to manage investor expectations. I am.

“What we’re hearing is that we really admit what we’re seeing at Covid,” GM’s chief financial officer Paul Jacobson told analysts Wednesday. “We are cautious,” he said, causing the virus to cause a recent tip supply problem from Malaysia.

While the pandemic and associated chip shortages disrupted production schedules, the crisis also brought unexpected benefits to automakers, including record pricing amid tight car supply. Car shoppers are back near record numbers Dealers and analysts said this spring was driven by continued low interest rates, declining household savings and stagnant demand from pandemics.

The global chip shortage is affecting the time it takes to get a car out of the parking lot or buy a new laptop. The WSJ will visit a manufacturing plant in Singapore to see the complex process of chip manufacturing and how one manufacturer is trying to overcome the shortage.Photo: Edwin Chen of The Wall Street Journal

According to analysts, these factors are raising investor expectations. GM’s full-year pre-tax profit forecast is between $ 11.5 billion and $ 13.5 billion, the highest ever, but below analysts’ forecasts.

“Clearly, the latter half of the guidance represents a splash of cold water and a reset of expectations,” Credit Suisse analyst Dan Levy said in a memo to investors. He predicted $ 15.6 billion in pre-tax profit for the full year.

According to the company, rising product costs will reduce revenues in the second half by $ 1.5 billion to $ 2 billion. Reverberating concerns from other automakers About the rise in raw material costs. GM also said the performance of GM Financial, the finance arm, is not as strong as it was in the first half.

Mary Barra, CEO, said GM expects to continue to tackle the semiconductor shortage from this year to 2022. The company said it will produce about 100,000 cars in North America in the second half of this year.

“There’s still more variability than I want to see,” Mr. Barra told reporters during the conference call. “I think the impact will continue this year, and it will have an impact next year.”

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GM said Wednesday that GM Financial’s strong pickup truck sales and record profits (backed by soaring used car prices) recorded a net profit of $ 2.8 billion compared to last year’s losses. rice field.

According to FactSet, automakers posted better pre-tax earnings than analysts’ average estimate of $ 1.82 before a temporary item of $ 4.1 billion, or $ 1.97 per share. According to GM, the results for the second quarter Remember the Chevrolet Bolt An electric vehicle to fix potential defects that can cause a fire.

Until recently, many car owners predicted that chip shortages would be mitigated later this year. However, it became clear that the fallout from the supply crunch was uneven and shifted.

Ford motor Ltd

It was hit hardest in the first half of this year, but last week’s executives said it was expected to improve in the coming months. Meanwhile, GM was able to avoid the disruption of profitable truck and SUV lines, but has recently faced a problem.

On Tuesday, the company said it plans to idle all three heavy-duty pickup truck plants in Mexico, India and Michigan next week due to a shortage of chips. These plants were also shut down or restricted last week, demonstrating that GM has significantly reduced truck production since the chip shortage began earlier this year.

By the second quarter, GM had cut production of about 325,000 vehicles in North America due to a chip shortage, according to estimates by research firm AutoForecast Solutions. According to the company, less than 10,000 of them were large pickups or large SUVs. GM diverted chips from other less popular models to keep the truck factory up and running.

Write to Mike Korea Mike.Colias@wsj.com

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GM reveals hits due to lack of chips, cost increase

Source link GM reveals hits due to lack of chips, cost increase

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