General Motors posts $2.8B profit; cautious tone sinks share price

DETROIT (AP) — General Motors posted a steadfast $2.8 cardinal second-quarter nett Wednesday, but its cautious outlook for the remainder of the twelvemonth spooked investors.

The Detroit automaker made the beardown nett contempt a planetary shortage of machine chips that person forced it and different companies to temporarily adjacent factories.

While GM raised its outlook for the year, it besides cautioned astir precocious commodity prices and little accumulation owed to the spot shortage, and it warned that the highly contagious delta variant of the coronavirus could hamper its proviso chain.

The cautious code rattled investors, who pushed GM shares down conscionable nether 9% astatine Wednesday’s closing bell.

Chief Financial Officer Paul Jacobson predicted that GM would nutrient 100,000 less vehicles successful the 2nd fractional of the twelvemonth compared with the first, adjacent arsenic different companies forecast improvements successful semiconductor production. GM said it managed the shortage good and was capable to divert scarce chips to factories that marque higher nett pickup trucks and ample SUVs.

But Edward Jones Industrials expert Jeff Windau said investors are gathering immoderate uncertainty into GM’s banal terms aft the institution forecast $3.5 cardinal to $4.5 cardinal worthy of accrued costs successful the backmost fractional of the year.

“Obviously there’s immoderate shutdowns, and there’s conscionable concerns with however things are evolving,” Windau said. “Expectations person been rising implicit the past mates of months. This conscionable benignant of comes backmost and perchance resets the barroom a small bit.”

On Tuesday, GM announced that pickup motortruck plants successful Flint, Michigan; Silao, Mexico; and Fort Wayne, Indiana; would beryllium closed adjacent week owed to the spot shortage. Production is to resume connected Aug. 16. But factories successful Tennessee and Mexico that marque cars and SUVs that were down since July 19 volition travel backmost connected enactment Monday.

Even with the caution, GM told the aforesaid communicative arsenic competitors Ford, Stellantis and others reporting beardown profits, saying that precocious prices and steadfast request for costly pickup trucks and luxury SUVs overcame inventory shortages.

GM boosted its nett income guidance for the afloat twelvemonth to $7.7 cardinal and $9.2 billion, and pretax net to a scope of $11.5 cardinal to $13.5 cardinal from $10 cardinal to $11 billion.

Executives said Wednesday that they expect choky inventory and precocious prices to proceed done the twelvemonth arsenic the spot shortage lingers into 2022.

Yet CEO Mary Barra warned that the fast-spreading coronavirus delta variant could origin proviso concatenation problems down the road. The institution besides has plans to grip aboriginal shortages by collaborating with semiconductor manufacturers, she said.

“There is inactive much variability than I’d similar to see,” Barra said. “This is thing we volition enactment our mode retired of, and it won’t beryllium an contented arsenic we determination guardant implicit a small spot longer play of time.”

The mean GM conveyance sold for astir $44,000 from April done June, the institution said, and it was up astir $3,000 implicit that successful July.

Jacobson said the precocious prices astatine contiguous travel from precocious request for much higher priced trucks and SUVs with a “very affluent mix” of options being purchased by consumers. Barra said the prices volition subside a spot arsenic inventory grows, but she inactive expects them to beryllium beardown arsenic GM adds electrical vehicles to its lineup.

Excluding one-time items, GM made $1.97 per share, beating Wall Street estimates of $1.82. Revenue was $34.2 billion, which besides exceeded analysts’ estimates of $29.92 billion, according to FactSet.

The nett would person been $1.3 cardinal higher if not for callback costs, including $800 cardinal to hole a artillery occurrence occupation successful older Chevrolet Bolt electrical vehicles, the institution said.

Barra said GM had a small much than 200,000 vehicles successful stock, capable to proviso 25 days of user demand. That’s acold abbreviated of the mean inventory. Automakers similar to person astir a 60-day proviso connected trader tons for customers to prime from.

On Tuesday, a task unit of Detroit car companies and the United Auto Workers announced that mill workers would beryllium required to deterioration masks again owed to the delta variant. Asked if GM would necessitate employees to beryllium vaccinated, Barra hinted that whitethorn beryllium coming. “We are evaluating aggregate choices that we tin make, but our intent is ever to support our employees and our customers safe,” she said.

GM said it produced astir 200,000 much vehicles successful the archetypal fractional of the twelvemonth than it did during the aforesaid play successful 2020, mostly due to the fact that factories were unopen down past twelvemonth arsenic the pandemic grew.

Yet the consulting steadfast LMC Automotive estimated that GM accumulation from April done June was down 38% from the aforesaid 4th successful 2019, the past comparable 4th of mean production.

Jacobson said the semiconductor shortage should commencement to easiness successful the 4th quarter, truthful fourth-quarter accumulation volition beryllium higher than the third. “You tin spot airy astatine the extremity of the passageway arsenic we’re getting toward that,” helium said.

Barra besides announced 2 caller electrical vehicles coming arsenic portion of GM’s program to present much than 30 globally by 2025. She said the Chevrolet marque volition rotation retired a full-size electrical cargo van, and GM besides volition merchantability a medium-duty electrical oregon hydrogen substance compartment motortruck level that tin beryllium utilized for work and inferior vehicles specified arsenic schoolhouse buses, bucket trucks and wreckers.