GM cites improved chip supply in raising financial guidance

ap photo President Joe Biden speaks during a visit to the General Motors Factory ZERO electric vehicle assembly plan on Nov. 17 in Detroit.

DETROIT — Citing an improved supply of automotive computer chips, General Motors raised its financial guidance on Wednesday and said it expects to return to a normal production rate by the end of next year.

Chief Financial Officer Paul Jacobson told investors on a virtual chat with Credit Suisse that the company has seen improvement in the fourth quarter on costs and sales volume as demand for its vehicles remains strong.

Nearly all automakers, including GM, have been hit by a global semiconductor shortage, which began late last year when chipmakers shifted production to consumer electronics after auto plants were closed due to the pandemic. When the auto plants came back, chip makers didn’t shift production back to auto chips, which unlike chips for computers and games, have to withstand extreme temperatures and rattling on the roads.

Jacobson said GM now sees pretax earnings for this year of around $14 billion, up from previous guidance of $11.5 billion to $13 billion. Net income for the year is expected to be around $10 billion, GM said in a regulatory filing.

“We’ve experienced a little bit of favorability on cost, and volumes (sales to dealers) are trending higher primarily on chip availability,” Jacobson said.

Jacobson said he expects the first three months of next year to be similar to this year’s fourth quarter, with improvement in the second half of 2022. He said there are “winds of caution” with the omicron variant of the coronavirus now appearing in the U.S.

Most automaker stocks rose in late-day trading Wednesday on news that the chip shorage may be easing. Shares of GM were up 1.3% to $58.60.

Sweden’s Volvo Cars made a forecast similar to GM’s when it announced third-quarter earnings on Tuesday. The automaker said chip supplies improved in the fourth quarter, but it expects the shortage to continue into 2022.

Phil Amsrud, senior principal analyst for IHS Markit who studies the chip market, said that’s consistent with his forecast of gradual improvement through 2022. “We’re expecting supply to be better in the second half of ’22 than the first,” he said. “We are seeing some indications of improvement but we’re also seeing areas that continue to be tight.”

Automakers, he said, have gotten better at managing lower chip supplies, keeping factories open on one shift rather than going flat-out and hoping for chip shipments to resume.

Demand for chips is still high, and automotive is still competing with consumer electronics and other industries.

The bottleneck continues to be high demand for chips that’s outstripping production capacity. Chip makers and others in the supply chain still are reluctant to invest in new factories for fear that the demand is artificially high.


Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *

Starting at $4.38/week.

Subscribe Today