GM’s net profit slid 40% in Q2 on chip shortage

DETROIT, Michigan: General Motors’ (GM) net income fell 40 percent in the second quarter from a year earlier as computer chip and parts shortages hobbled factory output and pulled down the company’s sales in the United States by more than 15 percent.

The Detroit, Michigan-based automobile maker said it made $1.67 billion in April to June, in part because it couldn’t deliver 95,000 vehicles during the quarter because they were built without one part or another. Last year, it made $2.79 billion.

The company reported an adjusted profit of $1.14 a share, falling short of Wall Street expectations of $1.27. Revenue was $35.76 billion for the three-month period, beating estimates of $33.9 billion, according to FactSet.

Like other automakers, GM has been forced to slow its factories since late 2020, largely due to a global shortage of semiconductors.

Despite the profit drop, GM held its full-year net income guidance steady at between $9.6 billion and $11.2 billion. It still expects pretax income of $13 billion to $15 billion.

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“This confidence comes from our expectation that GM global production and wholesale deliveries will be up sharply in the second half,” Chief Executive Officer Mary Barra told shareholders in a letter on Tuesday.

Still, Barra said there were concerns about economic conditions, so GM was taking steps to manage costs, including reducing discretionary spending and limiting hiring to critical positions needed to support growth.

“We also have modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” she added.

Most of GM’s incomplete vehicles were built in June, the company said, and it expects them to be finished and sold to dealers before year-end.

Also on Tuesday, GM announced it had commitments for all the raw materials needed to reach its goal of building 1 million electric vehicles (EV) annually by the end of 2025.

It also said it had a deal with LG Chem to supply nickel, cobalt, manganese and aluminum to make EV battery cathodes. LG Chem will supply more than 950,000 tons of material in the next eight years.

The two companies will explore a cathode material production facility in North America by the end of 2025, they said in a statement.

GM also announced a contract with Livent to supply battery-grade lithium hydroxide from a brine operation in South America over a six-year period starting in 2025. The Philadelphia-based company’s lithium also will be used in cathodes.