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GM Affirms Profit Outlook Despite Chip-Shortage Woes -- 2nd Update

05/05/2021 | 08:01am EDT

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

05-05-21 1001ET

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.04% 34479.6 Delayed Quote.12.61%
FORD MOTOR COMPANY 1.13% 15.28 Delayed Quote.73.83%
GENERAL MOTORS COMPANY 0.24% 61.49 Delayed Quote.47.67%
JPMORGAN CHASE & CO. -0.07% 160.29 Delayed Quote.26.14%
MORGAN STANLEY 0.40% 92.05 Delayed Quote.34.32%
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Financials (USD)
Sales 2021 134 B - -
Net income 2021 7 699 M - -
Net cash 2021 7 562 M - -
P/E ratio 2021 11,5x
Yield 2021 0,63%
Capitalization 89 202 M 89 202 M -
EV / Sales 2021 0,61x
EV / Sales 2022 0,52x
Nbr of Employees 155 000
Free-Float 95,1%
Duration : Period :
General Motors Company Technical Analysis Chart | MarketScreener
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Technical analysis trends GENERAL MOTORS COMPANY
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 71,84 $
Last Close Price 61,49 $
Spread / Highest target 46,4%
Spread / Average Target 16,8%
Spread / Lowest Target -2,42%
EPS Revisions
Managers and Directors
Mary Teresa Barra Chairman & Chief Executive Officer
Mark L. Reuss President
Paul A. Jacobson Chief Financial Officer & Executive Vice President
Randall D. Mott Chief Information Officer
Matthew Tsien Chief Technology Officer & Executive VP
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