# GM keeps on trucking despite Covid, semiconductor concerns
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-04
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: GM's Semiconductor Woes: Investors Yearning for More
Meta Description: Investors signal they want more profit from GM CEO Mary Barra as pickup truck sales soar amidst semiconductor shortage and pandemic uncertainty.
URL: https://financedigest.com/gm-keeps-on-trucking-despite-covid-semiconductor-concernshtml

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By Ben Klayman and Paul Lienert

DETROIT (Reuters) -General Motors Co’s pickup trucks are hauling in cash through the global semiconductor shortage and a resurgent pandemic, but investors on Wednesday signaled they want more from Chief Executive Mary Barra.

Shares in the No. 1 U.S. automaker fell 7.8%. The downbeat reaction to GM’s numbers – and to strong results earlier Wednesday from Toyota Motor Corp and Honda Motor Co – underscore the [uncertainty facing global automakers in a time of technological and economic](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector.html "Combatting economic uncertainty in 2023 with the payments sector") disruption.

Barra, in a call on Wednesday, said GM will “continue to see the impact this year” of the [chip shortage](https://www.financedigest.com/graphic-chip-price-drop-raises-questions-on-whether-end-of-shortage-is-in-sight.html "Graphic chip price drop raises questions on whether end of shortage is in sight"), and expects it will continue into the new year.

GM [reported second quarter net income of $2.8 billion](https://www.financedigest.com/australias-macquarie-explores-6-billion-deal-for-britains-mg-sky-news-reports.html "Australia’s Macquarie explores  billion deal for Britain’s M&G, Sky News reports"), or $1.90 a share, compared with a loss in the year-earlier quarter of $806 million, or 56 cents a share. The latest results included an $800 million cost for a second recall of Chevrolet Bolt [electric cars](https://www.financedigest.com/electric-car-insurance-your-questions-answered.html "Electric car insurance: your questions answered").

[Excluding items](https://www.financedigest.com/myhermes-boosts-smes-by-revising-cover-model-and-excluded-items-list.html "MyHermes Boosts SMEs By Revising Cover Model And Excluded Items List"), GM earned $1.97 a share. But analysts were expecting $2.23 a share, [according to IBES data](https://www.financedigest.com/most-sales-and-marketing-teams-struggle-to-activate-data-in-their-organisation-according-to-new-international-study.html "Most Sales and Marketing teams struggle to activate data in their organisation, according to new international study") from Refinitiv.

And analysts said GM’s full-year [profit guidance](https://www.financedigest.com/christmas-fizz-prompts-uks-sainsburys-to-lift-profit-guidance.html "Christmas fizz prompts UK’s Sainsbury’s to lift profit guidance") was conservative. GM [raised its full-year forecast](https://www.financedigest.com/centrica-names-obrien-as-new-cfo-raises-earnings-forecast.html "Centrica names O’Brien as new CFO, raises earnings forecast") for pre-tax profits to $11.5 billion-$13.5 billion, from the previous $10 billion-$11 billion.

Rival Stellantis NV earlier this week [boosted its target for full-year operating profit margins](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins") to about 10% from an earlier forecast of 5.5%-7.5%.

As GM’s [latest results](https://www.financedigest.com/french-wheat-protein-slips-further-in-latest-harvest-results.html "French wheat protein slips further in latest harvest results") demonstrated, the company’s near-term profits depend heavily on selling high-margin, combustion-engine pickup trucks and big sport utility vehicles in North America. GM’s U.S. [electric vehicle](https://www.financedigest.com/bmw-invests-1-7-billion-to-build-electric-vehicles-in-u-s.html "BMW invests .7 billion to build electric vehicles in U.S") sales were about 1.6% of U.S. deliveries in the second quarter.

But GM’s truck franchise market faces threats from Washington, where the Biden administration is expected as early as this week to [propose tougher vehicle emissions](https://www.financedigest.com/euro-7-emissions-proposals-the-sequel-europes-carmakers-dont-want-to-see.html "Euro 7 emissions proposals, the sequel Europe’s carmakers don’t want to see") limits and an accelerated shift to electric vehicles.

The grinding [pandemic also continues to threaten GM’s profit](https://www.financedigest.com/uncruise-adventures-navigated-the-pandemics-stormy-seas-to-turn-a-profit.html "UnCruise Adventures Navigated the Pandemic’s Stormy Seas to Turn a Profit") machine, directly and indirectly. The company expects to lose production of about 100,000 vehicles in North America in the second half, and anticipates commodity [costs rising](https://www.financedigest.com/suedzucker-quarterly-profits-surge-73-5-despite-cost-rise.html "Suedzucker quarterly profits surge 73.5% despite cost rise") by $1.5 billion-$2.0 billion.

The spreading Delta variant [poses a threat](https://www.financedigest.com/get-on-top-of-the-cyber-threat-posed-by-unmanaged-devices.html "Get on top of the cyber threat posed by unmanaged devices") to the company’s workers. GM, Ford Motor Co and Stellantis NV, along with the United Auto Workers, on Tuesday reinstated [mandatory mask](https://www.financedigest.com/mcdonalds-makes-masks-mandatory-for-all-customers-staff.html "McDonald’s makes masks mandatory for all customers, staff") wearing in their U.S. factories, and called on workers to get vaccinated.

GM has not followed other large U.S. employers in mandating workers get [COVID vaccinations](https://www.financedigest.com/fda-advisers-back-the-same-covid-vaccine-for-initial-shots-boosters.html "FDA advisers back the same COVID vaccine for initial shots, boosters"). But Barra did not rule out further [steps to combat](https://www.financedigest.com/3-steps-to-combat-cloud-outages.html "3 Steps to Combat Cloud Outages") the Delta variant. “We are evaluating what is appropriate and talking to different stakeholders,” Barra said. “We are evaluating multiple choices we can make.”

A ‘MUCH LEANER’ GM

The supply chain crunch and the [pandemic have forced GM to learn](https://www.financedigest.com/3-investing-lessons-you-can-learn-from-still-evolving-pandemic.html "3 Investing lessons you can learn from still-evolving pandemic") how to sustain sales and profits with far less inventory at U.S. dealers than in the past.

Going forward, Barra said, “we will be much leaner and efficient.”

GM’s inventories of unsold vehicles as of June 30 were half the year ago levels. It said it had $1.4 [billion worth](https://www.financedigest.com/why-a-quiet-revolution-in-the-cloud-is-worth-billions.html "Why A Quiet Revolution In The Cloud Is Worth Billions") of vehicles in inventory that had been built without certain electronics modules because of the lack of semiconductors.

GM said its more bullish [full-year outlook](https://www.financedigest.com/abb-dispels-industrial-gloom-to-raise-full-year-outlook.html "ABB dispels industrial gloom to raise full-year outlook") depended on having no vehicles stuck in inventory because of a lack of semiconductors. As of June 30, GM said it had $1.4 [billion worth of incomplete vehicles](https://www.financedigest.com/china-greenlights-audi-faws-3-3-billion-electric-vehicle-venture.html "China greenlights Audi-FAW’s .3 billion electric vehicle venture") in inventory.

The company reiterated its [plan to introduce more than 30 electric](https://www.financedigest.com/vw-to-speed-up-electric-shift-in-five-year-plan.html "VW to speed up electric shift in five-year plan") vehicles by 2025, including two new EVs that will be aimed at commercial and small-business customers.

However, the second quarter results illustrated the [risks of new technology](https://www.financedigest.com/thomson-reuters-report-reveals-risk-compliance-staff-expect-to-see-significant-benefits-from-artificial-intelligence-ai-and-distributed-ledger-technologies.html "Thomson Reuters Report Reveals Risk & Compliance Staff Expect to See Significant Benefits from Artificial Intelligence (AI) and Distributed Ledger Technologies"). The money set aside to pay for recalling Bolts to deal with a risk the [batteries could catch fire cost an average $11,600 per car](https://www.financedigest.com/scratched-ev-battery-your-insurer-may-have-to-junk-the-whole-car.html "Scratched EV battery? Your insurer may have to junk the whole car").

GM said its previously announced investment of $35 [billion between 2020 and 2025 is primarily to increase manufacturing capacity for EVs and batteries](https://www.financedigest.com/hyundai-breaks-ground-on-5-5-billion-u-s-ev-battery-plant.html "Hyundai breaks ground on .5 billion U.S. EV, battery plant"). The [company said it will add EV production](https://www.financedigest.com/feminine-hygiene-product-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2024.html "Feminine Hygiene Product Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2024") capacity by converting existing combustion-engine vehicle assembly plants.

Barra said she hopes the Biden administration and Congress will deliver more federal money to build [electric vehicle charging](https://www.financedigest.com/germany-added-35-more-electric-car-charge-points-in-2022-says-bdew.html "Germany added 35% more electric car charge points in 2022, says BDEW") stations, tax credits for investments in U.S. electric [vehicle plants and expanded tax](https://www.financedigest.com/tax-credits-for-eu-electric-vehicles-to-dominate-mondays-trade-talks-with-u-s.html "Tax credits for EU electric vehicles to dominate Monday’s trade talks with U.S") breaks for customers buying both new and used electric cars – all moves that would benefit GM.

GM said adjusted earnings before interest and taxes were a record $4.1 billion, and $8.5 [billion in the first half](https://www.financedigest.com/spotify-listeners-cross-half-a-billion-mark.html "Spotify listeners cross half a billion mark").

(Reporting by Paul Lienert and Ben Klayman in Detroit, writing by Joe White, editing by Louise Heavens and Nick Zieminski)


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