GM Affirms Profit Outlook Despite Chip-Shortage Woes -- 2nd Update
06 May 2021 - 12:16AM
Dow Jones News
By Mike Colias
General Motors Co. said it expects to hit the high range of its
2021 profit forecast despite the vexing computer-chip shortage, as
strong pricing and brisk new-vehicle demand offset supply woes.
GM reiterated its guidance Wednesday while reporting
first-quarter net profit rose hit $3.02 billion, compared with
about $300 million a year earlier, when the pandemic disrupted
operations. The company said the semiconductor shortage will hurt
second-quarter output, but the company 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 of GM, up 33% this year through Tuesday's close, rose
about 3.1% in early trading Wednesday.
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 was force 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. Shares of Ford
rose 1.3% in early trading Wednesday, and were up 30% this year
through Tuesday.
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 credited the strong bottom line in part to brisk sales of its
redesigned large SUVs, including the Chevrolet Suburban and
Cadillac Escalade, which have routinely sold for more than $100,000
since refreshed models arrived last year.
Chief Executive Mary Barra said the semiconductor situation is
"complex and fluid" and will cause more trouble in the second
quarter, but should subside through the second half of the
year.
Ms. Barra also said the disruption won't affect the company's
plan to spend bigger this year on developing electric and
autonomous vehicles, future bets that today are money losers but
have sparked investor enthusiasm. GM has said the majority of its
roughly $10 billion in capital expenditures this year will go
toward those potential growth areas.
"We continue to manage the transformation while managing, I'll
say, the tactical challenges of the semiconductors that we will
move out of," Ms. Barra told reporters during a conference
call.
GM also cited strong results from its lending arm, GM Financial,
which is benefiting from surging resale values for the used cars it
keeps on its books. The lender posted a record first-quarter pretax
profit of about $1.2 billion.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
May 05, 2021 10:01 ET (14:01 GMT)
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