GM posts $2.8 billion profit, raises full-year view
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3 min read . Updated: 04 Aug 2021, 05:46 PM IST - Auto maker sees solid pickup-truck sales and record profits for in-house lending arm
General Motors Co. posted strong second-quarter earnings and raised its full-year profit guidance, as global auto makers continue to benefit from sharp demand for new vehicles and strong pricing.
GM on Wednesday said solid pickup-truck sales and record profits for its in-house lending arm—boosted by soaring used-car prices—helped it notch $2.8 billion in net profit, compared with a loss a year earlier.
The auto maker posted pretax earnings before one-time items of $4.1 billion, or $1.97 per share, better than the average analyst estimate of $1.82, according to FactSet.
GM raised its pretax profit outlook to between $11.5 billion and $13.5 billion, up from a previous forecast of between $10 billion to $11 billion.
GM shares slipped 2.8% in premarket trading.
The auto maker raised its profit outlook in June, helped by its ability to sustain near-normal output levels of its biggest moneymakers—pickup trucks and large sport-utility vehicles, such as the Chevrolet Suburban—despite the continuing computer-chip shortage. GM has diverted chips from other, less-popular models to keep the truck plants going.
Through the second quarter, GM had cut production of roughly 325,000 vehicles in North America this year because of the chip shortage, research firm AutoForecast Solutions estimates. Fewer than 10,000 of those were large pickups or big SUVs, the firm said.
Trouble has surfaced in the third quarter. On Tuesday, the company said it would idle all three of its large-pickup-truck factories—in Mexico, Indiana and Michigan—next week because of a lack of chips. Those plants also were either down or limited last week, marking GM’s first significant cuts to truck production since the chip shortage began early this year.
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Also Tuesday, GM said it would reinstate mask mandates across its office and factory work force, a reminder that potential pandemic disruptions still linger.
The auto industry spent the first half of the year navigating the chip shortage while at the same time benefiting from unexpected effects of the crisis, including record pricing amid tight car supplies. Car shoppers returned in near-record numbers this spring, drawn by continued low interest rates, padded household savings and pent-up demand from the pandemic, dealers and analysts have said.
And consumers are shelling out more for new vehicles. The average price of a new vehicle in July eclipsed $41,000 for the first time, according to research firm LMC Automotive.
Now, as some companies signal that the supply crunch could ease in coming months, car companies are warning of other challenges ahead.
Rising costs for steel, aluminum and other commodities are likely to erode car makers’ profits in coming months, executives have said. Ford Motor Co. last week said surging raw-material costs are expected to shave $2 billion from its bottom line in the second half of the year. Jeep maker Stellantis NV on Tuesday also warned that rising commodity costs would hit earnings.
Both auto makers reported stronger-than-expected bottom lines and raised their profit forecasts.
Ford finance chief John Lawler said Monday that pricing is expected to remain relatively strong but is likely to moderate as chip supplies improve and dealership lots are replenished. He also said used-car pricing is likely to cool, which is expected to curb profit at the company’s in-house lender, Ford Motor Credit.
This story has been published from a wire agency feed without modifications to the text
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