GM General Motors Company

By Mike Colias 

General Motors Co. said it expects to hit the high end of its estimated 2021 profit range, as strong pricing and brisk new-vehicle demand helped offset the financial impact of a vexing chip shortage.

GM reiterated its guidance Wednesday while reporting first-quarter net profit of $3.02 billion, up from about $300 million a year earlier, when the coronavirus pandemic disrupted operations. The company said the semiconductor shortage will hurt second-quarter output but that it will continue to give priority to its most profitable vehicles, large pickup trucks and sport-utility vehicles.

The nation's largest auto maker by sales said pretax profit adjusted for one-time items hit $4.42 billion, equivalent to $2.25 a share. That beat the $1.05 average estimate of analysts surveyed by FactSet.

Revenue was $32.5 billion for the first quarter, compared with $32.7 billion a year earlier.

GM said it is confident that it will hit the high end of its previously issued guidance of $10 billion to $11 billion for the year, even as the impact from the semiconductor shortage cuts as much as $2 billion from the bottom line.

Shares rose about 3% in premarket trading.

A shortage of semiconductors globally continues to bedevil the auto industry with car companies expected to lose about 3.4 million units of vehicle production this year due to factory stoppages related to the lack of this critical part, according to research firm AutoForecast Solutions LLC. The industry produced 90.7 million vehicles during all of 2020, according to Wards Intelligence.

In North America -- by far the biggest profit generator for GM and rival Ford Motor Co. -- GM had to cut around 340,000 vehicles from its production plans so far this year, while Ford cut around 310,000, AutoForecast estimates.

But for Ford, the financial impact has been deeper because it has had to reduce output for several weeks at two F-150 pickup truck plants. The F-150 pickup truck is the company's bestseller and its biggest moneymaker. Meanwhile, GM's key pickup-truck and big-SUV factories have managed to sustain near-normal schedules. Ford shares sank last week after it gave profit guidance for the second half of the year that disappointed investors.

The auto industry's snarled output has left car makers with historically low vehicle stocks. At the end of April in the U.S., there were fewer than 2 million vehicles on dealership lots or en route to stores, 39% lower than a year earlier, according to research firm Wards Intelligence.

Even so, new-car buyers have been showing up at dealerships in droves as pandemic restrictions loosen, federal stimulus money flows and interest rates remain tame. The pace of new-vehicle sales in April hit its fastest clip in more than 15 years on a seasonally-adjusted basis, according to JPMorgan Chase.

The ripe car-buying environment has helped shares of auto makers remain resilient despite the supply-chain disruptions, Morgan Stanley analyst Adam Jonas said in a research note Monday. Investors so far have largely been looking past the chip issue, and are drawn to the industry's strong pricing and future bets on electric and autonomous cars, he said.

GM shares this year were up 33% through Tuesday's close while Ford's had risen 30%.

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

(END) Dow Jones Newswires

May 05, 2021 08:58 ET (12:58 GMT)

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