GM’s profit surges despite chip shortage

Detroit — General Motors’ firstquarter net income grew to $2.98 billion as strong U.S. consumer demand and higher prices offset production cuts brought on by a global shortage of computer chips.

Despite the shortage, GM stuck with full-year pretax earnings guidance of $10 billion to $11 billion issued earlier in the year and said earnings would be at the high end of the range. Full-year net income is expected to be between $6.8 billion and $7.6 billion. The company predicts a strong first half with a pretax profit of around $5.5 bilhigher GM executives wouldn’t give specifics on how much production they expect to lose to the chip shortage. But CEO Mary Barra said purchasing, manufacturing, engineering and sales teams are working to divert the chips from cars and smaller SUVs to full-size pickup trucks, big SUVs and new electric vehicles.

“A lot of really good work is being done across our company to source semiconductors, allocate them across them our most in-demand and (factory) capacity-constrained products,” she said.

The company reiterated that the shortage would cost it $1.5 billion to $2 billion in earnings before taxes this year due to lost production. GM has been forced to cut production of some smaller vehicles with lower profit margins, such as the Chevrolet Equinox SUV.

“Is there an impact this year? Absolutely,” Barra said on a conference call with reporters. “But the team keeps working to minimize it.”

GM’s first-quarter profit increase was 12 times larger than the same period last year, when the start of the coronavirus pandemic forced automakers to shutter faclion. tories, limiting GM’s net income to $247 million.

Shares of GM jumped 3.8 percent to $57.42 Wednesday.

Excluding non-recurring items, GM made $2.25 per share from January through March, doubling Wall Street estimates of $1.05. Revenue of $32.47 billion was below estimates of $33 billion according to FactSet.

The Detroit automaker reported pretax income for the first quarter at $4.4 billion.

During the quarter, the company said it was able to divert precious computer chips to higherprofit models that brought the income.

In the U.S., GM’s most profitable market, sales rose 4 percent from January through March compared with a year ago. However, the firstquarter sales of 639,406 vehicles was the second-lowest level in the first quarter since 2015, and the figures were 4 percent below the same period in 2019, according to Cox automotive.

Still, demand was strong and inventories were low, allowing GM to reduce discounts and raise prices. GM’s average sales price hit a record of $44,685, up 9 percent from a year ago, according to Cox figures.