Detroit — General Motors’ first-quarter net profit surged to $ 2.98 billion as rising consumer demand and rising prices in the United States offset production cuts caused by a global shortage of computer chips. ..
Despite the shortage of semiconductors, GM stuck to the $ 10- $ 11 billion full-year pre-tax revenue guidance issued earlier this year, saying revenue will be capped. Full-year net income is expected to be between $ 6.8 billion and $ 7.6 billion. The company forecasts pre-tax profit to be strong in the first half of the year, at around $ 5.5 billion.
CEO Mary Barra didn’t say how much production she expected to lose due to a chip shortage. But purchasing, manufacturing, engineering, and sales teams are working to convert chips from cars and small SUVs to full-sized pickup trucks, large SUVs, and new electric vehicles, she said.
“Procure semiconductors and allocate them to the most demanded ones, [factory] A product with limited capacity, “she said.
GM has repeatedly stated that this year’s shortfall will result in pre-tax profits of $ 1.5 billion to $ 2 billion due to production losses. The company was forced to reduce production of some low-margin compact cars, such as the Chevrolet Equinox SUV.
“Is there any impact this year? Absolutely,” Rose said in a conference call with a reporter. “But the team is working hard to minimize it.”
Earnings growth in the first quarter was 12 times higher than in the same period last year, when automakers closed their factories with the start of a coronavirus pandemic and GM’s net profits were limited to $ 247 million.
GM’s share price soared 3.5% at the opening bell on Wednesday.
Excluding non-regular items, GM earned $ 2.25 per share from January to March, doubling Wall Street’s estimate of $ 1.05. According to FactSet, revenue of $ 32.47 billion was below the $ 33 billion estimate.
Detroit automakers reported first-quarter pre-tax profit of $ 4.4 billion.
During the quarter, the company said it was able to divert valuable computer chips to high-profit models such as full-size pickup trucks and SUVs, which resulted in higher revenues.
In the United States, GM’s most profitable market, sales increased 4% from January to March compared to a year ago. Despite this increase, first-quarter sales were 639,406 units, the second lowest since 2015, down 4% from the same period in 2019, according to Cox Automotive.
Still, demand was strong and inventories were low, and GM was able to reduce discounts and raise prices. According to Cox figures, GM’s average selling price rose 9% from a year ago to a record of $ 44,685.
Last week, cross-town rival Ford Motor Company said production would halve this quarter due to a worsening chip shortage. The situation will improve in the second half, but Ford still sees production 10 percent lower than originally planned. That means Ford can’t make up for the lost production this year.
The company expects to lose 1.1 million annual plant production, up from a previous estimate of 200,000 to 400,000. This means fewer vehicles will be sold, but so far the prices have been higher due to strong demand.
Almost every car maker is suffering from a chip shortage as semiconductor makers switch their factories to more profitable consumer electronics processors when the car factory was closed by the coronavirus last year. The car factory returned faster than expected, but chip makers didn’t immediately switch the factory back to car-grade chips. After that, the March fire wiped out much of the chip production at Japanese factories that manufacture automotive chips.
Tom Chrischer