GM Undershoots Estimates on Chip Dearth, Lifts Full-Year Outlook

(Bloomberg) — General Motors Co. missed analysts’ profit estimates for the latest quarter but raised its full-year guidance as rich margins on pickups vied with nagging production cuts at its North American factories from a global semiconductor shortage.

Soaring new-vehicle prices on high-margin pickups couldn’t make up for supply chain issues in the second quarter and expenses related to battery fires on its Chevrolet Bolt electric vehicle. But GM remained optimistic about its full-year earnings prospects, boosting its 2021 forecast Wednesday after signaling in June it would hit the high-end of its previous guidance.

The Detroit automaker now expects adjusted earnings before interest and taxes of $11.5 billion to $13 billion for all of 2021, which translates to adjusted earnings of $5.40 to $6.40 per share. That compares to an earlier projection for $10 billion to $11 billion, or $4.50 to $5.25 a share.

Shares of GM fell 2.9% in premarket trading to $56.20 as of 7:45 a.m. in New York. The stock had gained 39% this year as of the close Tuesday.

Chip Shortfall

Record average transaction prices for new vehicles pumped up profits, even as GM and other automakers struggled to keep plants open due to shortfalls in chip supplies. The company’s average new vehicle transaction price in July rose 9% from a year earlier — almost double the industry average of 4.8% — to an estimated $44,749, according to market researcher TrueCar.

But it hasn’t been able to make the most of that uptick in pricing due to limited vehicle inventories. GM disclosed on Tuesday that output of its Chevrolet Silverado and GMC Sierra full-size pickups — which it sold a combined 237,000 of last quarter — would be affected by another round of temporary factory closures in Michigan and Mexico through Aug. 16.

The automaker reported adjusted earnings per share of $1.97 for the second quarter, below the $2.08 a share analyst consensus forecast compiled by Bloomberg. That compares to a 50 cents a share adjusted loss a year ago while in the grips of the pandemic and the 13 cents a share archrival Ford Motor Co. posted last week for the latest quarter.

GM said it spent $800 million on a recall issued late last month for almost 69,000 Chevy Bolts due to the risk of fires from defective batteries made by South Korea’s LG Chem Ltd.

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