May 25, 2022

GM Sees Brighter Profit Outlook as It Fends Off Computer-Chip Crunch

General Motors Co.

GM 5.93%

expects profits to be better in the first half of the year than it previously projected, citing steps it is taking to blunt the impact of the computer-chip shortage that has hampered global vehicle production for months.

GM on Thursday said it expects pretax profit for the first half of the year to be significantly better than guidance it issued a month ago. The auto maker said it is working to boost vehicle deliveries to dealerships, which have seen inventory fall to the lowest levels in decades.

The nation’s largest auto maker by sales said it has begun shipping tens of thousands of pickup trucks and other vehicles that had been built but waylaid in parking lots nearby its U.S. factories, awaiting needed components before being shipped. It also said it has been able to pull ahead some future semiconductor deliveries into the second quarter to help lift production.

GM said the chip situation remains fluid and will continue to disrupt production. It said it is optimistic it can make up ground in the second half of the year and continues to prioritize production of large pickup trucks and sport-utility vehicles, its biggest money makers.

GM shares rose about 3% in morning trading Thursday.

A global chip shortage is affecting how quickly we can drive a car off the lot or buy a new laptop. WSJ visits a fabrication plant in Singapore to see the complex process of chip making and how one manufacturer is trying to overcome the shortage. Photo: Edwin Cheng for The Wall Street Journal

The auto maker’s revised outlook is a welcome sign for an industry that has been coping with decades-low inventory levels because of the chip shortage, just as American car shoppers turn out in near-record numbers.

Car makers are trying to secure more chips and fill their pipeline to U.S. dealerships to satiate strong demand, stoked by stimulus money, continued low interest rates and pent-up demand from the pandemic, analysts and dealers say.

Through mid-spring, the chip shortage had decimated vehicle inventories, but dealers had been able to maintain a near-record sales pace. The tight supplies led to strong pricing, helping many car companies and dealer groups post record profits.

But the pace of sales cooled a bit in May, a sign that the lack of selection on dealership lots has begun to curb sales, analysts and dealers said.

“We are clearly starting to see the impact of the supply situation on end demand,” RBC Capital analyst

Joseph Spak

said in an investor note Wednesday.

U.S. vehicle sales in May fell to an average annualized selling rate of around 17 million vehicles, down from a pace of about 18.8 million in April, according to research firm Wards Intelligence.

GM posted near-record pretax profit for the first quarter of $4.4 billion, but signaled the disruption from the chip drought would sap second-quarter results. On May 5, it issued first-half pretax-profit guidance of $5.5 billion, implying profit would fall to around $1.1 billion for the April-to-June period.

The company on Wednesday said only that first-half performance would be significantly better than its previous $5.5 billion forecast, but didn’t provide numbers. It said it is optimistic about the full year, which it previously said would deliver $10 billion to $11 billion in pretax profit.

GM previously said the chip shortage would shave $1.5 billion to $2 billion from its bottom line this year.

GM said it has begun shipping about 30,000 midsize pickup trucks that it had built and set aside awaiting needed chips, many parked in lots around its St. Louis-area assembly plant. It aims to deliver that backlog to U.S. dealerships by around the July 4 weekend.

Write to Mike Colias at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Related Posts

AMC Boss Adam Aron Basks in Meme-Stock Spotlight

June 4, 2021

June 4, 2021

Adam Aron, AMC Entertainment Holdings Inc.’s AMC -6.68% chief executive, has decided to run with the meme-stock bulls who helped...

Shareholder of MDC Partners Opposes Merger With Stagwell

May 27, 2021

May 27, 2021

One of MDC Partners Inc.’s largest shareholders is opposing the advertising company’s proposed merger with Stagwell Media, a private-equity fund...

Inside Comcast’s Plan to Become a Streaming Giant

June 23, 2021

June 23, 2021

Comcast Corp. chief executive Brian Roberts built a colossus, branching out from cable and broadband into entertainment with the acquisition...

Google, Facebook, Amazon Among Those Set to Fight House Big Tech Antitrust Package

June 24, 2021

June 24, 2021

The House Judiciary Committee voted on Thursday to approve the final piece of its six-part package, the “Ending Platform Monopolies...

Pfizer Suspends Global Distribution of Chantix Smoking-Cessation Pill on Contamination Concerns

June 25, 2021

June 25, 2021

Pfizer Inc. PFE 0.03% has suspended distribution world-wide of antismoking pill Chantix and recalled some lots after finding they contained...

For DoorDash and Uber Eats, the Future Is Everything in About an Hour

May 31, 2021

May 31, 2021

DoorDash Inc.’s DASH -1.66% and Uber Eats’ ambitions are bigger than your lunch. They are after a whole new category...

Tesla Failed to Oversee Elon Musk’s Tweets, SEC Argued in Letters

June 1, 2021

June 1, 2021

WASHINGTON—Securities regulators told Tesla Inc. TSLA -0.21% last year that Chief Executive Elon Musk’s use of Twitter had twice violated...

Amazon Nears Deal to Buy Hollywood Studio MGM

May 24, 2021

May 24, 2021

Amazon.com Inc. AMZN 1.51% is nearing a deal to buy the Hollywood studio MGM Holdings for almost $9 billion, said...

John McAfee, Antivirus Software Creator, Is Found Dead in Spanish Jail

June 23, 2021

June 23, 2021

John McAfee, the antivirus software pioneer who founded cybersecurity company McAfee, was found dead Wednesday in a jail cell in...

Global Ad Spending Expected to Rebound Faster Than Previously Forecast

June 14, 2021

June 14, 2021

After a reversal last year, global ad spending is forecast to snap back from the pandemic even faster than previously...

Tesla to Store China Data Locally in New Data Center

May 26, 2021

May 26, 2021

SHANGHAI— Tesla Inc. TSLA -0.29% said all data generated from cars it sold in China will be stored in a...

AMC’s Largest Shareholder Wanda Group Pares Down Stake

May 22, 2021

May 22, 2021

AMC Entertainment Holdings Inc.’s AMC -3.75% largest shareholder, China’s Dalian Wanda Group Co., has sold most of its shares in...

As Cruises Resume, a Positive Covid-19 Case Doesn’t Spell the End of a Voyage

June 11, 2021

June 11, 2021

Two passengers sharing a room on a Caribbean cruise ship tested positive this week for Covid-19, triggering safety precautions that...

Why It’s So Hard to Fill Jobs in Certain States

May 29, 2021

May 29, 2021

The labor-market recovery after the coronavirus pandemic and related shutdowns is playing out unevenly across the U.S., from states where...

Puerto Rico’s Power Distributor Suffered a Cyberattack Hours Before a Devastating Fire

June 11, 2021

June 11, 2021

Puerto Rico’s main power provider suffered a cyberattack shortly before a fire at a substation in San Juan Thursday caused...