By Akanimo Sampson
Despite a global shortage of semiconductors that has constrained auto manufacturing, General Motors still reported a higher first-quarter profits and reaffirmed its full-year outlook.
The automaker’s share price rallied after the report, which showed GM has been more resilient amid the upheaval caused by the chip crunch compared with some of its rivals.
The big US automaker reported profits of $3 billion, 10 times the level in the year-ago period, on strong vehicle pricing, even as revenues were essentially flat at $32.5 billion.
And the company said it is “highly confident” in its full-year financial outlook released in February given strong continued consumer demand for autos.
GM benefited from higher auto deliveries in the United States and China that more than offset declines in other markets.
Another bright spot was GM Financial, the company’s lending arm, which posted higher profits amid rising prices for used vehicles.
GM Chief Executive, Mary Barra, described vehicle demand as “extremely strong,” and said “there’s strong interest in people wanting to buy vehicles as we recover” from the most severe impacts of the pandemic.
In a conference call with reporters, Barra said the second quarter would be the “weakest” period of 2021, with conditions improving somewhat in the second half of the year.
The company’s continued confidence in the full-year outlook reflects “super creative” ingenuity throughout its supply chain teams, she said.
Asked about the semiconductor issue, Barra said, “Is there an impact this year? Absolutely, but the team keeps working to minimize it.”
Like other carmakers, GM has temporarily suspended production at some factories due to the semiconductor shortage. But it has worked to minimize the impact on its best-selling trucks, which generally have higher profit margins.
Later Wednesday, in an interview with CNBC, Barra said GM might not make up all of the production curtailments in the second half of the year, but that it would “make up as much as we can.”
About a half dozen of GM’s North American assembly plants currently have or plan reduced or suspended production. This includes factories in Ontario, Canada, and the state of Kansas that have been offline since February and are not scheduled to resume operations until late June or early July, a GM spokesman said.
Barra said she now expects full-year operating profit to be “at the higher end” of the previously released $10 billion to $11 billion range.
JPMorgan Chase called GM’s results “impressive overall” and said in an analysis that the confirmation of the outlook shows “strong company-specific execution.”
Last week, Ford cut its full-year operating profit forecast after estimating a hit of $2.5 billion due to the semiconductor shortage after previously estimating the impact at between $1 billion and $2.5 billion.
