Ford, GM profits fall as sales drop due to chip shortage

DETROIT » The global computer chip shortage cut into third-quarter profits at both Ford and crosstown rival General Motors, with both companies having to temporarily close factories, pinching supplies on dealer lots.

Ford’s net income of $1.83 billion fell 23% from a year ago, while GM’s profit dropped 40% to $2.4 billion. High prices, mainly for the pickup trucks and big SUVs that the automakers sold, eased the sting from lower sales.

Ford, which reported results after Wednesday’s closing bell, said its revenue dropped 5% from a year ago to $35.68 billion. That fell short of Wall Street estimates of $38.2 billion.

Excluding one-time items, the Dearborn, Michigan, company made 51 cents per share, beating the 27 cents expected by analysts polled by FactSet.

Ford said its board voted to restart a regularly quarterly dividend of 10 cents per share starting in the fourth quarter. Its stock jumped 4.5% in after-market trading.

Ford’s sales fell 27% from July through September in the U.S., its most lucrative market. The company also lost 2.4 percentage points of U.S. market share, largely because like GM, it couldn’t produce enough vehicles to meet demand.

But the average Ford new vehicle sold for more than $51,000 during the quarter, up almost 13% from a year ago, according to Edmunds.com.

GM’s earnings fell from $4 billion last year as sales slumped and the company lost market share in the U.S., also its most profitable country. Revenue for the quarter plunged 25% to $26.78 billion.

Excluding one-time items, the company made $1.52 per share, beating Wall Street estimates of 98 cents.

Revenue for the quarter fell 25% to $26.78 billion, far short of Wall Street estimates of $30.72 billion, according to FactSet.

On a conference call with analysts, CEO Mary Barra said she is “pretty confident” that GM’s San Francisco-based Cruise autonomous vehicle subsidiary would be carrying passengers without human safety drivers sometime next year. To do that, Cruise still needs a final permit from California regulators.

Barra also told reporters Wednesday that the global shortage of semiconductors, plus COVID outbreaks at supplier factories, hit the company during the third quarter. “It still continues to be somewhat volatile,” she said.

However, GM is seeing some improvement in the current quarter and expects additional supplies in the first three months of 2022, she said. “We’ll see this improving, but we’ll see this impact into next year,” Barra said.

GM has said it expects to produce about 200,000 fewer vehicles in the second half of this year compared with the first half, with most of the impact occurring from July through September.

Fourth-quarter production should look more like the second quarter, which was stronger than the third, Chief Financial Officer Paul Jacobson said. But he said GM faces commodity price inflation and additional investments in new products and manufacturing.

Barra said she’s spoken with the CEOs of most major chip makers, and the companies are working on strategies to make sure the shortages don’t happen again. “I think we’ll definitely see changes to ensure we have the right supply,” she said.

GM’s third quarter profit came even though U.S. sales for the quarter were almost 33% lower than a year ago. The company lost 3.8 percentage points of U.S. market share, according to the Edmunds.com website.

“The ongoing disruption to supply chains created by the chip shortage has been particularly harsh to GM, which appeared to struggle with the biggest declines in sales and market share compared to its Detroit Three counterparts in Q3,” said Ivan Drury, Edmunds’ senior manager of insights.

But Barra said she expects GM’s market share to bounce back when factories get back to normal production. “We are selling everything we can. I wish we had more vehicles,” she said, pointing to strong pickup truck and SUV market share. “We’ve been for years the No. 1 sales leader in the United States, and I am confident with the product line we have and some of the new products coming that we’ll regain that as soon as we have the supply availability. ”

Consumer willingness to pay high prices for scarce new vehicles kept the money flowing for GM. The average sale price paid for a GM vehicle topped $50,000 for the quarter, up more than 16% from a year ago, Edmunds said. Barra said that once supplies grow, she expects the high prices to ease.

With the expected improvement in chip supplies, GM increased its full-year net income guidance to a range of $8.1 billion to $9.6 billion. In the second quarter it was $7.7 billion to $9.2 billion.

Shares of GM closed Wednesday down 5.4% at $54.26.