GM posts ‘blowout’ quarterly profit, keeps 2021 forecast

General Motors Co. reported stronger-than-expected profit growth in the first quarter on robust vehicle demand in the U.S. and China even as a shortage of semiconductors curtailed production. It left its full-year outlook unchanged.

The Detroit-based automaker posted adjusted profit of $2.25 a share Wednesday, beating a consensus estimate of $1.08. GM attributed the healthy performance to booming sales of full-size and higher-margin sport utility vehicles and pickup trucks.

“We’ve had a very strong start to the year," Chief Executive Officer Mary Barra said on a call with reporters.

GM left its full-year earnings forecast unchanged despite the chip-procurement issues bedeviling the industry. It now expects earnings to be “at the higher end" of its earlier projection of adjusted Ebit of $10 billion to $11 billion, or $4.50 to $5.25 per share.

“The company is highly confident in its full-year 2021 guidance outlined earlier this year as it works to manage through the semiconductor shortage," it said in a statement.

Evercore ISI analyst Chris McNally praised what he called GM’s “blowout" first-quarter performance and predicted a “relief rally" in auto stocks.

Shares of the company rose 4.1% to $57.61 in premarket trading. The stock had risen about 33% so far this year as of Tuesday.

Scarce Semiconductors

Automakers have been forced to cut output as they scour their supply chains to secure semiconductors as buyers emerge from pandemic lockdowns and snap up increasingly popular crossovers, SUVs and pickups.

GM said the chip shortfall, which has caused shutdowns at multiple plants, would continue to weigh on output this quarter. But it let stand a previous estimate for a hit of $1.5 billion to $2 billion.

“We think Q2 will be the weakest and start to recover in Q3," Barra told reporters.

Ford Motor Co. saw its stock tumble last week after it said planned production would be halved in the second quarter, saw the chip shortfall extending in 2022 and forecast a $2.5 billion EBIT reduction from the shortage.

GM credited its work to minimize the disruption to a company-wide effort involving everyone from engineers to sales staff, even as its inventory shrank to just 335,000 vehicles -- almost half the 668,000 cars and trucks on hand a year ago.

“Our supply chain and manufacturing teams are maximizing production of high-demand and capacity-constrained vehicles," Barra said in a letter to shareholders. “Our engineering teams are creating effective alternative solutions, and our sales teams, together with our dealers, are finding creative ways to satisfy customers despite lean inventories."

Another factor in GM’s favor: Unlike Ford, it doesn’t have as much exposure to Renesas Electronics Corp., a Japanese semiconductor maker which is recovering from a fire, according to Joel Levington, director of Bloomberg Intelligence’s credit research.

No EV Impact

GM is making a major push to electrify its lineup by 2035, and roll out 30 EVs over the next four years. Barra said that shift is not being impacted by the lack of semiconductors.

But the costs of production cuts has had a negative impact on the company’s cash position. GM burned through $1.9 billion in cash in the first quarter, $1 billion more than last year.

Revenue came to $32.47 billion in the first quarter, slightly below the consensus estimate for $32.77 billion.

GM’s financing unit also contributed to its first quarter performance. GM Financial’s adjusted EBIT came to $1.2 billion -- up from just $230 million a year earlier -- due in part to higher used vehicle prices and low interest rates.

GM’s North American operations grew strongly, making $3.1 billion in profit compared with $2.2 billion a year ago.

The company said its business in China, the world’s largest car market, earned $308 million equity income through its joint ventures. That was up from a loss of $167 million a year ago.