GM Lifts Forecast on Strong Sales, Chip-Shortage Workarounds
(Bloomberg) -- General Motors Co. expects to earn about $14 billion in pre-tax profit this year, more than its previous guidance to Wall Street analysts, the automaker's chief financial officer said.
Sales have been strong and GM has been able to mitigate lost production caused by a semiconductor shortage, CFO Paul Jacobson said during an event hosted by Credit Suisse on Wednesday. The Detroit-based company had previously projected earnings of $11.5 billion to $13.5 billion before interest and taxes.
Even though the chip shortage remains a problem, Jacobson said, GM has seen the situation stabilize to a point where it can start to boost sales. The fourth-quarter performance should lead to earnings beyond its previous suggestion that profit would be at the high end of the range. Lean inventories mean there isn't much discounting on vehicle prices, which will help keep margins above 10% in GM's North American business, the CFO said.
“With incentives down, the quality of revenue has been greater,” Jacobson said. “I expect 2022 will be a strong cash year.”
GM's shares rose 2% to $59.03 as of 3:13 p.m. in New York.
The paradigm will likely remain throughout 2022, Jacobson said, with GM unable to get back to its traditional inventory levels next year.
“I don't think we'll be anywhere near normalized inventory,” Jacobson said. “I don't think we're going to get there by the end of 2022 even as we stabilize and get chips.”
©2021 Bloomberg L.P.
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