General Motors, and indeed the broader auto industry, is facing down several challenges through the second half of the 2021 calendar year, including possible major impacts from the latest resurgence of COVID-19, as well as the ongoing global microchip shortage. However, despite these challenges, General Motors may still be in store for record profits.
Per a recent report from Automotive News, GM says it expects $13.5 billion in adjusted earnings this year, as compared to the previous forecast of $10 billion to $11 billion. Notably, this would eclipse GM’s post-bankruptcy record of $12.85 billion, set in 2016.
“What you’re hearing from us is sort of a very real acknowledgment of what we see out there with COVID,” said General Motors CFO Paul Jacobson last week. “It may turn out to be less impactful than we think it is.”
Jacobson also indicated that there is currently $1.4 billion worth of vehicles waiting for new microchips, which are needed in order for the vehicles to be completed. “Significant cash flows could shift from 2021 to 2022 if we have these work-in-process vehicles held,” Jacobson said.
Looking ahead, General Motors certainly has its work cut out for it. During the first half of the year, General Motors saw one-time gains in equity investments, while lower lease-termination volume and commodity inflation were notably absent from the first half of the year. Taken together, these factors add up to $3.5 billion to $4.5 billion in headwinds for the second half of 2021, according to Automotive News.
Interior of GM’s Arlington plant
Production is another critical piece of the puzzle. General Motors expects to produce 100,000 fewer vehicles in North America in the second half of the year compared to the first half. However, to keep production rolling, General Motors has adopted a number of strategies to reduce the impact of the microchip shortage. One of these is the so-called “build-shy” strategy wherein popular models are produced without certain features, then completed later as additional chips are sourced. General Motors has also dropped certain features outright, including AFM / DFM fuel management from certain pickup truck models.
Nevertheless, the potential for record profit-making remains. Notably, General Motors rival Ford Motors Co. also raised its full-year earnings guidance, up to $9 billion to $10 billion from the $5.5 billion to $6.5 billion set previously.
Subscribe to GM Authority for more General Motors business news and around-the-clock General Motors news coverage.
Comments
Brother, those are 2 big If’s… Every automaker globally is in a similar situation, more demand then they have cars on the ground.
Now Barra can prove her pay check.
Can Barra cure Covid, or make parts?
Record profits via cut corners and high prices.
How exciting.
What about problem with electric car Bolt- ??
9 months after first recall still NOTHING!!
BATTERIES ARE NOT SAFE ! CARS ARE BURNING!!! And we are very scared to not become the next…
When GM will DO “something???!!!! They refused to buyback our Bolt!!!
Gm has to make better cars. I stopped buying them years ago. I love Japanese and European cars. The best…..
Lowercase gm says that no one wants cars and so does their crosstown buddy Ford. Of course they are not going to say no one wants their cars.
For your being a us traitor and buying foreign
I just rented a Toyota 4 runner (all i could get)
Its a sad excuse for a suv
Very tinny feeling shutting the doors
Couldn’t get leg under steering wheel when fully adjusted and telescoped up
Couldn’t see turn signal at stoplight without bending down
I’ve always known Japanese cars weren’t made for taller Americans (never owned one)
For some reason when you rent cars on trips
Its hard to get american
I will drive my high quality American vehicles mainly ford forever
Yes I agree with that person I rented a Toyota Tacoma and it was a nice truck but it was horrible on the highway it could barely keep up with traffic it’s weird nothing like my Acadia and was very small on the inside the interior was very cheap and the doors were like a tin can compared to the Acadia I am finally retiring the Acadia with $340,000 MI really didn’t want to get rid of it but I have the Buick enclave and I really love that even though that has 200,000 miles on it
Delta surge 😜 The Fauci ouchie. Get a clue people
Why does anyone care if GM makes a profit? Lol. I certainly dont
With fuel prices climbing on a weekly designed basis by the new national master plan to move everybody from IC’s to EV’s, this will spook buyers from purchasing gm’s full size IC vehicle cash cows.
Share price will weaken.
And rid themselves of overpaid Mary Useless Barra
Is merry single? I could use some of that 40M