General Motors has raised its profit outlook for the year after observing a slight improvement in the microchip supply chain.
GM Chief Financial Officer Paul Jacobson said this week he expects the automaker’s full-year adjusted pre-tax profits to reach about $14 billion. The automaker previously announced a profit outlook of 10 to 11 billion following Q1 of this year before raising it to 11.5 to 13 billion after Q2. GM shares jumped 2.5 percent following Jacobson’s remarks, Reuters reports, and were up 3.41 percent at the time of publication Thursday morning.
Jacobson said the automaker adjusted its profit outlook after observing a slight improvement in the microchip supply. The automaker is also benefitting from high consumer demand for its most profitable products, such as the Chevy Silverado 1500 and Chevy Tahoe, along with high prices and low incentive spending across the industry. GM said previously that it hopes to limit the impact of future chip supply crunches by working more closely with suppliers and implementing a new microcontroller design.
Despite the slight improvement, Jacobson expects GM to continue to face production setbacks and inventory shortages throughout 2022 as chip producers continue to struggle to keep pace with demand. He also said GM would not go back to stocking too many vehicles in dealership lots and storage lots like it did before and will instead try to strike a balance between having too many and too few vehicles on hand.
While GM’s profit outlook improved in Q3, the automaker is also seeing the effects of rising components prices, with Jacobson saying the automaker has observed “inflation everywhere.” This could cause vehicle prices to rise further and incentive spending to remain very low throughout 2022.
GM has managed its mircochip supply by removing certain features from its vehicles. For example, a wide variety of Buick, Chevrolet, Cadillac and GMC vehicles will have limited heated seat and heated steering wheel availability for the 2022 model year. Some trucks have also been built without active fuel management or dynamic fuel management, while others have been produced without an HD radio transmitter.
GM also said this week that it does not expect its business to be heavily impacted by the COVID-19 pandemic or new emerging variants, with Jacobson saying it is “continuing with the protocols that we have put in place, that have worked.”