Electronic demand weigh on chip supply as GM latest automaker to cut production
General Motors Co. beat analysts’ estimates for fourth-quarter profit and signaled continued earnings strength this year despite short-term damage from a semiconductor shortage that is cascading through the auto industry.
GM reported an adjusted profit of US$1.93 per share for the fourth quarter Wednesday compared with analysts’ consensus estimate of US$1.56, thanks to strong demand for its pickup trucks and large sport-utility vehicles.
Chevrolet Silverado pickup trucks at a car dealership in Colma, California.
The robust results cap off a tumultuous year for GM, which weathered shutdowns from the COVID-19 pandemic and outlined a bold move to exit gasoline-powered cars. But the guidance for 2021 shows that GM expects to grow profit despite hurdles such as the semiconductor shortfall remaining this year.
Mary Barra, GM’s chief executive officer, addressed the chip issues in a call with reporters, vowing the company will shield its highest profit margin vehicles.
“We’re doing everything possible right now so we won’t lose any production throughout the year for full-size trucks and SUVs,” she said.
Shares of the carmaker dropped in premarket trading, falling 1.4 per cent to US$56.09 as of 8:52 a.m.
The semiconductor shortage will shave US$1.5 billion to US$2 billion off adjusted earnings this year, the company estimated. It already has idled three plants until mid-March and been forced to build vehicles without certain modules at other factories, holding them until more chips come in. But it said that would be a temporary setback.
For 2021, GM forecast adjusted earnings before interest and taxes of US$10 billion to US$11 billion, which translates to adjusted earnings per share of US$4.50 to US$5.25. That compares with US$4.90 a share in 2020 and US$8.4 billion in adjusted earnings before interest and taxes.
GM saw market share growth in the fourth quarter both at home and in China, the world’s largest car market.
In North America, GM reported a quarterly adjusted income before interest and taxes of US$2.6 billion and a margin of 8.7 per cent after running its truck and SUV plants full out.F
The Detroit automaker said its business in China is showing signs of a resurgence. Profit there came to US$248 million on a 37 per cent jump in revenue to US$14.1 billion.
Profits in the Chinese market still lag behind just a couple of years ago, when the company used to make US$2 billion a year, but Barra told reporters she sees a path to recovery.
“As the industry recovers and we roll out SUVs, we can get to levels that we’ve had in the past,” she said.
GM plans capital expenditures this year of US$9 billion to US$10 billion -- with US$7 billion of that earmarked for programs such as electric and autonomous vehicle development. That tops rival Ford Motor Co.’s US$6.5 billion capital-spending budget for 2021.