GM Sees Brighter Profit Outlook as It Fends Off Computer-Chip Crunch -- Update
June 03 2021 - 10:31AM
Dow Jones News
By Mike Colias
General Motors Co. expects profits to be better in the first
half of the year than it previously projected, citing steps it is
taking to blunt the impact of the computer-chip shortage that has
hampered global vehicle production for months.
GM on Thursday said it expects pretax profit for the first half
of the year to be significantly better than guidance it issued a
month ago. The auto maker said it is working to boost vehicle
deliveries to dealerships, which have seen inventory fall to the
lowest levels in decades.
The nation's largest auto maker by sales said it has begun
shipping tens of thousands of pickup trucks and other vehicles that
had been built but waylaid in parking lots nearby its U.S.
factories, awaiting needed components before being shipped. It also
said it has been able to pull ahead some future semiconductor
deliveries into the second quarter to help lift production.
GM said the chip situation remains fluid and will continue to
disrupt production. It said it is optimistic it can make up ground
in the second half of the year and continues to prioritize
production of large pickup trucks and sport-utility vehicles, its
biggest money makers.
GM shares rose about 3% in morning trading Thursday.
The auto maker's revised outlook is a welcome sign for an
industry that has been coping with decades-low inventory levels
because of the chip shortage, just as American car shoppers turn
out in near-record numbers.
Car makers are trying to secure more chips and fill their
pipeline to U.S. dealerships to satiate strong demand, stoked by
stimulus money, continued low interest rates and pent-up demand
from the pandemic, analysts and dealers say.
Through mid-spring, the chip shortage had decimated vehicle
inventories, but dealers had been able to maintain a near-record
sales pace. The tight supplies led to strong pricing, helping many
car companies and dealer groups post record profits.
But the pace of sales cooled a bit in May, a sign that the lack
of selection on dealership lots has begun to curb sales, analysts
and dealers said.
"We are clearly starting to see the impact of the supply
situation on end demand," RBC Capital analyst Joseph Spak said in
an investor note Wednesday.
U.S. vehicle sales in May fell to an average annualized selling
rate of around 17 million vehicles, down from a pace of about 18.8
million in April, according to research firm Wards
Intelligence.
GM posted near-record pretax profit for the first quarter of
$4.4 billion, but signaled the disruption from the chip drought
would sap second-quarter results. On May 5, it issued first-half
pretax-profit guidance of $5.5 billion, implying profit would fall
to around $1.1 billion for the April-to-June period.
The company on Wednesday said only that first-half performance
would be significantly better than its previous $5.5 billion
forecast, but didn't provide numbers. It said it is optimistic
about the full year, which it previously said would deliver $10
billion to $11 billion in pretax profit.
GM previously said the chip shortage would shave $1.5 billion to
$2 billion from its bottom line this year.
GM said it has begun shipping about 30,000 midsize pickup trucks
that it had built and set aside awaiting needed chips, many parked
in lots around its St. Louis-area assembly plant. It aims to
deliver that backlog to U.S. dealerships by around the July 4
weekend.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
June 03, 2021 10:16 ET (14:16 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Aug 2024 to Sep 2024
General Motors (NYSE:GM)
Historical Stock Chart
From Sep 2023 to Sep 2024