GM Exceeded Estimates But Warned Of Chip Shortage

Last week, General Motors GM reported fourth-quarter earnings that easily beat Wall Street expectations. However, the Detroit giant also warned that a global semiconductor chip shortage could cut this year's earnings up to $2 billion. GM increased its EV and AV investments to $27 billion as it plans to launch 30 EVs globally and challenge Tesla's TSLA to become the EV market leader in North America.

Chip shortage

As demand for cars rebounded more strongly than expected following a two-month shutdown of plants due to the coronavirus pandemic, automakers and parts suppliers began warning of the shortage late last year. Due to the shortage, GM has already temporarily closed plants in Kansas, Canada and Mexico through mid-March, while also cutting production in South Korea. As for the production of highly profitable full-size pickup trucks and SUVs, GM will likely need to partially build some models without the parts and complete assembly later. CEO Mary Barra declined to estimate how many vehicles would be affected. The chip shortage is expected to cost GM somewere between $1.5 billion and $2 billion whereas its crosstown rival, Ford Motor Company F expects its earnings to be lowered $1 billion to $2.5 billion as a result. The Blue Oval was forced to cut production of its profit-critical F-150 pickup due to the shortage.

GM's Q4 figures

Adjusted earnings per share were $1.93, exceeding the expected $1.64, based on average analysts' estimates compiled by Refinitiv. Revenue amounted to $37.5 billion, also exceeding the expected $36.12 billion. As a whole, fourth-quarter earnings didn't have a hard time beating last year's results which were negatively impacted by a U.S. labor strike that froze production during the whole fourth quarter. On an unadjusted basis, net income was $2.85 billion compared with last year's dramatic loss of $194 million. Pretax adjusted earnings of $3.7 billion for the fourth quarter also went up from $105 million a year earlier.

2021

For the year, GM expects to spend $9 billion to $10 billion. All-electric and autonomous vehicle development is to be accelerated along with rollouts and there is the deferred spending from last year due to the pandemic. GM priorly stated that it expects annual capital expenditure costs to exceed $7 billion through at least 2023.

The quarterly results cap a tumultuous year for GM that sees tremendous opportunity in EVs as the company is only beginning its shift toward leaving the internal combustion engines behind.

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