GM stands by profit forecast despite chip shortages

Despite a chip shortage that has roiled the global auto industry, General Motors said it expects to earn $11bn this year, the high end of its guidance.

The company is attempting to divert chips to larger, more profitable vehicles like pick-up trucks and sport utility vehicles, as well as electric vehicles as it continues ambitious electrification plans.

GM on Wednesday reaffirmed its forecast from February for adjusted earnings before interest and taxes of between $10bn and $11bn in 2021 and $1bn to $2bn in adjusted free cash flow for the year. Executives said net income would fall between $6.8bn and $7.6bn.

Like other automakers, GM has been shaken by the chip shortage. The auto industry is grasping for semiconductors after electronic device makers snapped up chips at higher prices during the pandemic. Extreme weather in Texas then combined with a fire at a chip plant in Japan to further squeeze the world’s supply.

“This remains a challenging period for the company,” chief executive Mary Barra said. “Our supply chain and manufacturing teams are maximising production of high demand and capacity-constrained vehicles.”

“We’re working with the supply base to get every chip we can,” she added.

GM idled plants in Kansas and Ontario, Canada, in February, and the company said on Monday they would not restart for another two months. A plant in Lansing, Michigan, was briefly restarted after being idled in March but will stop work again next week until late June. Its plant in San Luis Potosí, Mexico, has operated in fits and starts.

GM earned net income of $3bn in the first quarter, compared with $294m for the same period last year, as the pandemic hit. Revenue fell slightly from $32.7bn in the first three months of last year to $32.5bn for the same period this year.

The company posted diluted adjusted earnings per share of $2.25, above the $1.05 predicted by the 20 analysts polled by FactSet. Revenue was slightly below the expectation of $33bn.