GM General Motors Company

By Mike Colias 

General Motors Co. posted strong fourth-quarter earnings and offered a bright profit outlook for this year despite an expected hit from a global semiconductor shortage.

The Detroit auto maker said Wednesday it expects lost production from an unfolding shortage of computer chips to erode its bottom line this year by $1.5 billion to $2 billion.

The amount is in line with the decline expected by rival Ford Motor Co., which is among the many car companies that have been forced to cut output as demand for semiconductors has surged during the pandemic, leaving the auto industry to compete with other sectors for limited chip supplies.

Net income for GM's September-to-December period was $2.85 billion, reversing a small loss from a year earlier, when a strike at its U.S. plants shaved off billions from its bottom line.

Its fourth-quarter pretax profit totaled $3.71 billion, a record for that quarterly period and up from a small gain in the year-earlier period. That amounted to $1.93 a share, better than the average analyst estimate of $1.60.

Revenue rose about 22% from the strike-marred fourth-quarter of 2019, to $37.52 billion.

The nation's largest auto maker said it expects profits to climb this year despite ongoing supply-chain disruptions from the semiconductor shortage and a sharp rise in the price of raw materials, including steel.

GM on Wednesday reinstated profit guidance for the first time since the spring, forecasting pretax income of $10 billion to $11 billion for the full year 2021, or $4.50 to $5.25 a share. That includes the $1.5 billion to $2 billion hit expected from production stoppages stemming from the industrywide chip shortage.

The company said on Tuesday it plans to extend a shutdown at several North American factories due to tight chip availability. At other plants, it is building some vehicles without certain computer chips and storing them to add the parts once they arrive, the company said.

Toyota Motor Corp., which on Wednesday raised its profit forecast for the fiscal year that ends March 31, is one of the few global auto makers that has managed to largely sidestep the chip problem so far.

Toyota said it has stockpiled parts and that production cuts have been minimal.

GM Chief Executive Mary Barra told reporters that GM is working with suppliers to mitigate the fallout from the chip shortage and would prioritize output of pickup trucks and sport-utility vehicles, its most profitable vehicles.

"The semiconductor shortage won't slow our growth plans," Ms. Barra said.

For the year, GM's pretax profit rose about 16%, to $9.71 billion. GM posted record profit in the third and fourth quarters, after its second-quarter bottom line was nearly wiped out by the pandemic-related disruptions earlier in the year.

Demand for new vehicles, particularly the big SUVs and trucks that are Detroit's sweet spot, returned faster-than-expected this summer. That helped GM bounce back from a harrowing two-month shutdown of its North American factories in the spring. A combination of tight inventories and strong demand for its most expensive models also lifted pricing and profit margins to record levels.

For example, more than 40% of Cadillac Escalades sold in the fourth quarter at prices above $100,000, well above previous levels. Buyers paid up for the big SUV, which recently underwent its first extensive redesign in about seven years.

GM's global pretax profit margin rose to 7.9% last year, from 6.1% a year earlier. That included a record 9.9% margin in the fourth quarter.

GM also said it would accelerate its capital spending this year after the pandemic forced it to slash investment by about $2 billion in 2020.

The company plans capital expenditures of $9 billion to $10 billion this year, with roughly three-quarters of it earmarked for electric and autonomous vehicles, Ms. Barra said.

"We see tremendous growth opportunities" in those areas, she said.

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

(END) Dow Jones Newswires

February 10, 2021 09:55 ET (14:55 GMT)

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