GM looks for strong full-year earnings

DETROIT – General Motors’ firstquarter net income surged 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 predicted a strong first half with a pretax profit of about $5.5 billion.

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 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 because of lost production. GM has been forced to cut production of some smaller vehicles with lower profit margins, such as the Chevrolet Equinox SUV.

“Some of the other peers have come out and expressed significant production cuts in the second quarter, and obviously the stock prices have been punished for that,” Windau said.

Barra said the worst impact of the shortage will take place in the current quarter.

GM’s first-quarter profit was 12 times larger than in the same period last year, when the start of the coronavirus pandemic forced automakers to shutter factories.