The Mercury News

General Motors profit jumps as demand for vehicles climbs

- By Neal E. Boudette

General Motors said on Wednesday that it made $2.8 billion in the second quarter and increased its profit forecast for the full year, suggesting the largest U.S. automaker was faring a lot better than expected.

GM and other car companies have been forced to idle factories periodical­ly this year because of a global shortage of computer chips. The production slowdown has kept a lid on sales, but it has created shortages of new and used cars, increasing the selling price of cars and trucks.

The industry, like others, is also now growing more concerned about what the spread of the Delta variant of the coronaviru­s will mean for their business. The United Automobile Workers union, GM, Ford Motor and Stellantis, formerly Fiat Chrysler, said this week that they would go back to requiring all workers to wear masks because of the variant, though they would not mandate vaccinatio­ns.

“GM had a very strong second quarter and first half of the year,” GM’s chief executive, Mary T. Barra, said in a conference call to discuss the second quarter results. “Of course, we will continue to monitor COVID very closely.”

Three months ago, GM indicated it would only make about $500 million in the three months that ended in June, after earning $3 billion in the first three months of the year. The second quarter results include $1.3 billion in warranty and recall costs, including $800 million for fixes to Chevrolet Bolt electric cars whose batteries can overheat and catch fire.

Last month GM recalled 51,000 Bolts in the United States to fix manufactur­ing defects that can lead to fire. GM said the defects were rare, but the recall is still a big headache for the automaker, which plans to do away the internal combustion engine in its cars and trucks by 2035.

The company reported revenue of $34.2 billion in the second quarter, up from $16.8 billion a year ago when sales were crushed by the pandemic. In the first quarter, GM had revenue of $32.5 billion.

GM now expects a profit of $11.5 billion to $13.5 billion before interest and tax in 2021, up from a previous estimate of $10 billion to $11 billion.

Last month, Tesla also reported strong earnings for the second quarter despite the chip shortage. Ford, which had been hurt by the shortage more than some other manufactur­ers, said its profit fell by half, to $561 million, in the second quarter.

Barra said GM had managed the chip shortage by allocating electronic components in short supply to the plants making its most profitable and popular models. She added that the shortage would continue to be a problem until next year.

Because of the chip shortage GM has about 200,000 cars and light trucks on dealer lots in the United States, about a quarter of what was previously considered normal. Although bad for sales, the limited supply has meant that dealers and the companies no longer have to offer discounts or haggle over prices with customers.

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