This story has been updated with comments made by GM CEO Mary Barra and CFO Paul Jacobson during an earnings call on Wednesday.
General Motors managed to deliver stronger-than-expected third-quarter earnings, despite an ongoing shortage of semiconductors and its impact on the automaker’s production and sales efforts.
The largest of the Detroit-area automakers reported adjusted earnings of $2.9 billion, or $1.52 a share, Wednesday morning, significantly higher than the 96-cent consensus forecast, according to Refinitiv. Even with key products like the high-profit Chevrolet Silverado pickup in short supply, GM managed to deliver revenue of $26.8 billion compared to the collective forecast of $26.5 billion.
Looking forward, GM said it is maintaining its financial guidance for the full year, with adjusted earnings expected to come in between $11.5 billion and $13.5 billion, or $5.40 to $6.40 a share. Full-year net income is forecast to reach between $8.1 billion and $9.6 billion.
By comparison, GM reported earnings of $6.2 billion, or $4.21 a share, during the first six months of 2021.
“Our third quarter results, which while reflecting the near term challenges of the global semiconductor supply chain issues, clearly shows the strength of our underlying business,” CEO Mary Barra said during an earnings call.
Barra lays out her vision`
In a statement to shareholders, Barra focused on GM’s evolving strategy which includes not only its core automotive business but new and expanding operations like autonomous vehicle subsidiary Cruise Automation, and BrightDrop, a startup venture set to begin producing all-electric delivery vans.n a statement to shareholders, CEO Mary Barra sidestepped the third-quarter results, focusing insteadIn a statement to shareholders, CEO Mary Barra sidestepped the third-quarter results, focusing instead on GM’s evolving strategy which includes not only its core automotive business but new and expanding operations like autonomous vehicle subsidiary Cruise Automation, and BrightDrop, a startup venture set to begin producing all-electric delivery vans.
“By the end of the decade, we envision that connected vehicles and other new businesses will drive more than $80 billion in new, incremental revenue,” Barra said in her letter to investors. “At the same time, revenue from EVs is expected to grow from about $10 billion in 2023 to $90 billion.”
Earlier this month, GM leaders advised analysts at a meeting in Michigan it intends to double its annual revenue by 2030 and boost EBIT-adjusted margins to between 12% and 14%.
More immediately, however, the auto industry has been struggling with a variety of challenges resulting from the COVID-19 pandemic. That includes shortages and supply disruptions of a number of key parts, components and materials — most notably the semiconductors critical to modern automobiles. GM previously warned Wall Street it would lose production of about 200,000 vehicles during the second half of 2021 due to the chip shortage.
The company has been trying to overcome that by partially assembling vehicles, where possible, then storing them until it received the semiconductors needed to complete production — a process known as “build shy.” GM has now finished up about half of the vehicles that were sidelined, shipping them off to dealers, Steve Carlisle, the head of GM’s North American operations, said last week.
For his part, GM Chief Financial Officer Paul Jacobson told analysts during the Wednesday earnings call that they can “expect sequentially higher (production) volumes” during the fourth quarter of this year.
That would help substantially considering GM suffered a 32.8% decline in retail sales for the third quarter due to its lack of dealer inventory. And it’s expected to see a year-over-year dip for October, as well. The automaker has been forced to repeatedly curb production as plants run out of chips, but it has signaled it expects to see all of its North American factories operating as of Nov. 1. That would mark the first time since February there have been no plants idle.
Nonetheless, Jacobson warned that, “We foresee low inventories and strong pricing continuing well into next year.”
Investors are pleased
The question is whether GM — and the rest of the industry — can begin to relax, at least in terms of getting the parts and materials they need. As TheDetroitBureau.com has reported, there are other shortages looming, including plastics and foams, as well as tires, and these could again lead to temporary plant closures.
Despite such concerns, investors were pleased with the third-quarter numbers GM reported. The automaker’s shares closed slightly lower the previous afternoon but quickly rebounded ahead of the official market opening on Wednesday.