Amid a computer chip and car parts shortage, GM third-quarter profits plummet 40%

Asia's Tech News Daily

General Motors reported Wednesday that its third-quarter net income plummeted 40% as it struggled against production constraints and thin new car inventory.

The auto industry has faced a global shortage of semiconductor chips since February. The chips are used in many car parts and, without them, production at many GM plants has either slowed or stopped completely, leaving dealers’ new car lots bare.

The automaker reported a net income of $2.4 billion, down from $4 billion in the year ago period. Its adjusted earnings before interest and taxes (EBIT) was $3 billion, down from $5.3 billion. Revenue sank 25% to $26.8 billion compared to the year ago quarter when it was $35.5 billion.

In a letter to shareholders Wednesday, GM CEO Mary Barra assured Wall Street that GM is positioned well for the future with its strategy to introduce 30 new electric vehicles by 2025 and a promise to double revenues in the next decade with EVs and other diversification the company outlined earlier this month.

2023 Corvette Z06:Vehicle extends legend with radical new engine, 2.6-second 0-60 dash

Car costs:Which is more expensive? Charging an electric vehicle or fueling a car with gas?

Amid a computer chip and car parts shortage, GM third-quarter profits plummet 40%

But she acknowledged the struggles GM faced this quarter.

“The quarter was challenging due to continuing semiconductor pressures,” Barra wrote. “But it also includes very strong results from GM Financial, the recall cost settlement we reached with our valued and respected supplier and JV partner LG Electronics, and ($300 million) in equity income from our joint ventures in China.”

Barra ended by saying GM is tweaking its estimate for its full-year results, saying it will approach the high end of GM’s earlier guidance, “which is for EBIT-adjusted in the range of $11.5 billion to $13.5 billion, well above the $10 billion to $11 billion outlook we shared in February.”

Warning signs

GM’s results shouldn’t be a surprise to Wall Street, after all the warning signs were there.

“GM made it through the early part of the year relatively unscathed, keeping its all-important pickup truck and SUV factories running by allocating computer chips to those more popular and more profitable models instead of installing them into less popular, less profitable and more abundant models, mostly cars,” said Michelle Krebs, executive analyst at Cox Automotive.

But by the third quarter, the chip shortage caught up to GM, forcing it to drastically cut production of all models across the board, Krebs said.

In September, GM warned Wall Street that the third quarter would be challenging because of the chips deficit. GM’s CFO Paul Jacobson said, at the time, the automaker’s second-half vehicle sales and production would be down 200,000 units compared with the first half, largely in the third quarter. GM delivered 1.1 million vehicles in the first half.

Then on Oct. 1, GM reported its new vehicle sales in the U.S. plummeted 33% from the year-ago period. It sold 446,997 vehicles in the U.S. compared with 665,192 a year ago. The U.S. accounts for the bulk of GM’s revenues and profits.

The good news for the automaker is GM’s average transaction prices are up 16%, surpassing $50,000 for the first time, to $50,392, Krebs said. GM cut incentives by 46% to an average of $2,994 per vehicle, according to Cox Automotive calculations.

But Barra told reporters as product availability increases when the chips crisis improves, “the incredibly strong pricing will mitigate some, but we’re going to be more efficient than we’ve been in the past.”

That could mean GM will offer less inventory, thereby less consumer discounts, in the future even as it starts building more cars.

Eye on the future

“The ongoing disruption to supply chains created by the chip shortage has been particularly harsh to GM,” said Ivan Drury, Edmunds’ senior manager of insights.

Drury noted that GM has been “applauded” for its investor day earlier this month when it said it would double annual revenues by 2030 and grow earnings before interest and taxes (EBIT) adjusted margins as it transitions to an all-electric future.

GM talked about a future all-EV lineup at that time and gave Wall Street a peek at the Chevrolet Silverado E, the all-electric pickup it plans to debut at the Consumer Electronics Show in Las Vegas in 2022. GM showed a picture of its all-glass roof.

Amid a computer chip and car parts shortage, GM third-quarter profits plummet 40%

But, said Drury, “All eyes will be on how GM weathers these more immediate shortages, which should serve as a key indicator of whether the company can actually deliver on its loftier future goals.”

A bright spot for GM is that consumer demand remains strong for pickups and big SUVs, which carry fat profit margins, even amid inventory woes, Drury said.

“GM also dodged a bit of a bullet in that the bulk of the battery issues with its Bolt EV seemed to fall more on LG’s shoulders instead of the automaker itself, particularly at a time when the industry has been distracted by other headlines,” Drury said.

Earlier this month, GM reached an agreement with its battery supplier, LG Electronics Inc., over the heavy costs to recall nearly 140,000 Chevrolet Bolt EVs and EUVs globally. LG will reimburse GM for $1.9 billion in costs associated with the Bolt recall due to manufacturing defects in battery modules that LG supplied.

GM said Tuesday it will restart production at its Orion Assembly plant in Orion Township where it builds the Bolts on Nov. 1. The plant has been idle since Aug. 23. GM will operate it for two weeks to make some vehicles to serve as courtesy loaner cars for Bolt owners who have to leave their cars with dealers for the recall repairs.

Starting Nov. 1, it will be the first time since early February that nearly all GM plants will be operating.

Barra expects the chips shortage to improve by next year, but it will not clear up until late 2022. Barra said she’s had conversations with the CEOs of nearly ever semiconductor manufacturer and, “you’ll definitely see changes to ensure we have the right supply and some of it will be added capacity and some of it will be how we work together in the supply chain.”

GM is the first of the Detroit Three to release its third-quarter earnings. Ford Motor Co. is expected to release its results later Wednesday and Stellantis early Thursday.

This story was edited for content after publishing.

Follow Jamie L. LaReau on Twitter @jlareauan.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

23 new models and $18B: The staggering numbers behind Nissan's new all-electric plan

On Monday, Nissan its “Ambition 2030” grand plan, which — surprise, surprise — is all about electrification and sustainability goals. Too many pledges have been made, so we’ve broken them ... Read more »

Tesla Model 3 By Vilner Looks Stylish With Tartan Gray Fabric Interior

Tesla Model 3 By Vilner Front Three Quarters Tesla Model 3 By Vilner Front Corner Tesla Model 3 By Vilner Driver Side Tesla Model 3 By Vilner Passenger Side Tesla ... Read more »

Read Parag Agrawal's email to employees on becoming the new Twitter CEO

Twitter will soon have a new CEO. Indian-origin Parag Agrawal, who is currently the chief technical officer (CTO) of Twitter, will replace Jack Dorsey. Dorsey made the announcement in a ... Read more »

Project Fenix, un prototipo inspirado en el mítico Ferrari F50

Ugur Sahin Design USD Project Fenix F50 Homage Ugur Sahin Design USD Project Fenix F50 Homage Ugur Sahin Design USD Project Fenix F50 Homage Ugur Sahin Design USD Project Fenix ... Read more »

How to change your car's spark plugs

Spark plugs are a vital part of a gasoline-powered car’s engine. Without them the engine won’t start, and if they’re in rough shape the engine will run poorly. Nearly all ... Read more »

You can get a Solo Stove for 40% off during Cyber Monday

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Cyber Monday 2021 deals are here! There’s never been a better ... Read more »

What maps made by 20th century suffragists can teach us about holding leaders to account on climate change

The women’s suffrage movement was one of the most successful political movements in history. Picryl I’m a geographer who’s produced many maps depicting human effects on the environment – and ... Read more »

Score 30% off all Tuft & Needle mattresses during its amazing Cyber Monday sale

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Need help refreshing your sleep routine after daylight savings? Tuft & ... Read more »

Craig Revel Horwood Has A Prediction About This Year's Strictly Come Dancing Final

Craig Revel Horwood (Photo: SOPA Images via Getty Images) Craig Revel Horwood has picked the three couples who he thinks should make the final of this year’s Strictly Come Dancing. ... Read more »

Gordon Ramsay has the best response to Tilly's Strictly exit - proving they have the sweetest bond

Gordon Ramsay rushed to support his daughter Tilly following her exit from Strictly Come Dancing in Sunday's results show – and his message to her is so heartwarming. SEE: 7 ... Read more »

Mother denies murdering her two-year-old son who was 'submerged in bath water'

Natalie Steele, left, is accused of murdering her son, two year-old Reid. (Wales News Service) A mother has denied murdering her two-year-old son who was allegedly submerged in the bath. ... Read more »

Jonathan Van Tam says COVID Omicron surge is not all doom and gloom - 'Please don't panic'

Deputy chief medical officer for England Professor Jonathan Van Tam. (Getty) Professor Jonathan Van Tam has said the COVID Omicron surge is not all “doom and gloom” and people should ... Read more »

Lego Cyber Monday deals 2021: Get a free Luke Skywalker lightsaber with this Star Wars AT-AT set

Make the most of this bundle offer while you can (iStock/The Independent) Calling all Star Wars stans and building block fans, this one is for you. Get your snowtroopers on ... Read more »

The best Cyber Monday 2021 Academy Sports deals: Nike, ProForm and more

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. If you want to get a head start on your 2022 ... Read more »

New Maruti Suzuki Celerio: Top feature highlights

© Nikhil Puthran New Maruti Suzuki Celerio: Top feature highlights In an effort to revive interest in the entry-level B-segment Maruti Suzuki recently launched the new Celerio in the country. ... Read more »

Jack Dorsey steps down as Twitter CEO

Jack Dorsey, the co-founder and chief executive officer of Twitter Inc., is stepping down, ceding the position to the company’s Chief Technology Officer Parag Agrawal. The move is effective immediately, ... Read more »

Twitter CEO Jack Dorsey is leaving after 16 years

Twitter CEO Jack Dorsey is leaving the social media platform he co-founded 16 years ago. Dorsey announced the news on Twitter (via a tweeted screenshot of an email, naturally) early ... Read more »

This unbeatable Black Friday 55-inch LG OLED TV is still available

Without a doubt, the best OLED TV deal on a 55-inch TV this Black Friday was this incredible offer for the LG OLED55A1 . And, despite the warnings on the ... Read more »

Cyber Monday soundbar deals: the 13 best soundbars to pick up today

Want to improve your TV’s sonic performance with a soundbar but you’ve missed the Black Friday sales? Never fear, Cyber Monday is underway and there’s plenty of great deals to ... Read more »

Water on Earth might have come from the Sun, study says

(Independent) Water on Earth might have come from the Sun, according to a new study. Our planet is covered in water: with more than 70 per cent of its surface ... Read more »

You don't want to miss Allbirds' first ever Cyber Monday sale

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Here’s some seriously big Cyber Monday news: Cult favorite sustainable sneaker ... Read more »

Twitter co-founder Jack Dorsey will step down from his executive role at the social media platform

SAN FRANCISCO — Twitter co-founder Jack Dorsey will step down from his executive role at the social media platform. Read more »

Este Volvo con 1,6 millones de km sigue funcionando tras 30 años

Volvo P1800 de 1966 Volvo P1800 de 1966 con 5 millones de kilómetros Volvo P1800 de 1966 Volvo P1800 de 1966 con 5 millones de kilómetros Volvo P1800 de 1966 ... Read more »

Mercedes Vision EQXX to land at CES with 621 miles of range

Mercedes-Benz is coming to the 2022 edition of CES with its most ambitious electric car project to date. It’s called the Vision EQXX, and it’s planning on revealing the car ... Read more »

Earth's water may have developed from dust particles carried from the Sun

Researchers may have solved a mystery about the origins of Earth’s water, finding the Sun to be a surprising source. The scientists describe how new analysis of an ancient asteroid ... Read more »

Memorial held for Sgt Matt Ratana

A memorial service and procession has taken place for police sergeant Matt Ratana who was shot dead inside a police custody facility in London last September. It was attended by ... Read more »

Nokia builds private 5G network in a Lapland goldmine

Nokia and Telia are building a private 5G network at a gold mine in Northern Finland, helping Agnico Eagle Finland digitise its operations and take advantage of Industry 4.0 applications. ... Read more »

Jack Dorsey steps down as Twitter CEO, Parag Agrawal named as successor

It all started with Jack Dorsey “just setting up my twttr.” More than 15 years after that first tweet, the CEO and co-founder of social media giant Twitter is stepping ... Read more »

Why Meta's $315M acquisition of Giphy is set to get BLOCKED

Meta, the corporate conqueror formerly known as Facebook, looks set to lose a chunk of its gargantuan empire. According to , the UK’s competition regulator is expected to reverse the ... Read more »

This Cyber Monday Apple Watch 6 deal even beats the Black Friday price

Cyber Monday deals are live, and we’ve just spotted an incredible offer on the best-selling Apple Watch 6 that’s sure to go fast. Amazon just dropped the Apple Watch 6 ... Read more »

PlushBeds has cut up to $1,250 off its luxury organic mattresses for Cyber Monday - plus you get $549 of free bedding

It’s Cyber Monday and there’s a whopping $1,250 off PlushBeds mattresses today – plus you get up to $549-worth of free bedding with every mattress. That drops the price of ... Read more »

Thor: Love and Thunder: cast, release date, plot and what we know so far

Thor’s come a long way since he was banished to Earth in the original Kenneth Branagh-directed movie, way back in 2011. One of the founder members of the Avengers, the ... Read more »

Twitter CEO Dorsey 'to step down'

Twitter Inc Chief Executive Officer Jack Dorsey will step down from his role and a successor has been lined up, a person familiar with the matter has told Reuters. The ... Read more »

Why people in some parts of England pay far more than others to heat their homes

Bradford has less energy efficient homes than equivalent towns in southern England. Rodney Hutchinson / shutterstock The energy used to heat and light our homes doesn’t get as much attention ... Read more »

Petrol price hike: Here's what it will cost to fill-up your tank in December

© Provided by The South African Do you ever get the feeling you’ve been shafted? The latest fuel hike for South Africa has caused more misery for the motorists of ... Read more »

Renault teaches the 4 how to fly for its 60th birthday

Renault is celebrating 60 years of the 4, one of its best-selling and most emblematic models, by turning it into a flying car. It teamed up with a design firm ... Read more »

Twitter shares spike 9% following report chief executive Jack Dorsey to step down

Jack Dorsey, 45, who co-founded the company in 2006, is expected to step down from his role at the company according to a report at CNBC citing sources. Read more »

Apple may announce its first AR headset in 2022: Report

With 2021 drawing to a close, rumours and guesses about what the tech companies have in store for the next year have started their fair share of rounds again. Tech ... Read more »

Reliance Industries shares jump after Jio tariff hike announcement

Shares of Reliance Industries Limited on Monday gained over 1 per cent after its telecom arm Jio announced an up to 21 per cent hike in prepaid tariffs from next ... Read more »

Porsche Expanding Paint to Sample Choices to over 160 Colors

© Porsche The new colors are available on every model in Porsche’s lineup, including the Cayenne SUV, and Porsche will build many more of the special-color vehicles. Porsche in increasing ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic