GM General Motors Company

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.

The auto maker said that in recent weeks it boosted vehicle deliveries to dealerships by starting to release tens of thousands of trucks that had been parked awaiting parts. It is racing to restock record-low vehicle inventories at dealerships to satisfy surging demand from U.S. car shoppers, who are turning out in big numbers as pandemic restrictions recede.

GM on Thursday didn't provide specific numbers but said it expects pretax profit for the first half of the year to be significantly better than guidance it issued on May 5. The company also said the disruption from the chip shortage will continue.

"I don't think we necessarily like updating guidance a month after we just issued it," GM finance chief Paul Jacobson said during a virtual Credit Suisse investor conference. "But that shows you how fluid and volatile the situation has been."

GM shares advanced about 6% in afternoon trading Thursday to $63.15, an all-time high since shares began trading publicly in 2010, a year after the auto maker's bankruptcy.

Mr. Jacobson said GM was able to pull some semiconductor deliveries into the second quarter to help lift production and ship vehicles that had been waylaid in parking lots nearby its U.S. factories. He said GM initially had expected to deliver those vehicles in the third quarter, which means the company now will be able to book that revenue in the second quarter.

GM said in a statement 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.

The revised outlook from the nation's largest auto maker by sales is a welcome sign for an industry that has been coping with decades-low inventory levels because of the chip shortage, just as vehicle sales hit a near-record pace.

Car makers are trying to secure more chips and fill their pipelines 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 were able to maintain the near-record pace. 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's brighter profit outlook came on the same day rival Ford Motor Co. released muted U.S. sales results for May, revealing the toll the chip shortage has taken on its vehicle inventories.

Ford's May sales rose 4% from a year earlier, when Covid-19 quarantines sharply reduced U.S. car sales. That lagged behind the industry's 42% increase for May and trailed GM's 37% increase and Stellantis AG's 34% increase, according to data from research firm Motor Intelligence, cited in a Credit Suisse note. GM and Stellantis don't report monthly sales.

Ford reduced output at each of its two F-150 factories, in Michigan and Kansas City, Mo., for weeks this spring due to the chip shortage. GM, meanwhile, has been able to avoid down-time at its plants that produce large pickups and SUVs. Ford said May sales of F-Series pickup trucks fell 29% from a year earlier.

Ford shares rose about 7% in afternoon trading Thursday to their highest level since 2015.

Last month, 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. It also 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 Thursday 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.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

June 03, 2021 16:16 ET (20:16 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.