General Motors has today posted far stronger than expected first-quarter profit despite a global semiconductor chip shortage as it held down costs and focused on high-margin pickup trucks and SUVs.
The Detroit automaker also said its full-year pre-tax profit would come in at the high end of its forecast.
"The speed and agility of our team are front and centre as we move from managing through a pandemic to managing the global semiconductor shortage," chief executive Mary Barra said in a letter to shareholders.
"This remains a challenging period for the company as we emerge from 2020," she added.
Barra said the biggest US automaker was focused on "maximising production of high-demand and capacity-constrained vehicles" like the full-sized Chevrolet Silverado pickup, and GMC Yukon, Chevy Suburban and Cadillac Escalade SUVs.
Barra said on a conference call with reporters that the chip shortage will worsen in the second quarter before starting to improve in the second half of the year.
"Every region in the world has been dealing with the supply and demand imbalance for semiconductors, and we have been working through some significant disruptions to production," she said.
GM reiterated its full-year 2021 earnings guidance and said "based on what we know today," its results will be at the upper end of the $10 billion to $11 billion adjusted pre-tax profit it has previously forecast.
The company stuck to earlier forecasts that the chip shortage could shave $1.5 billion to $2 billion from this year's profits.
Carmakers across the world have had to curb output, hampering their attempts to recover from the Covid-19 pandemic, due to a shortage of vital chips used in everything from computer management of engines to driver assistance systems.
Stellantis, created from the merger of PSA and Fiat Chrysler, today said it expects the shortage to take a bigger bite out of second-quarter production and warned the disruption could last into 2022.
Ford said last week it expects second-quarter vehicle output to be halved by the shortage.
Thanks to high consumer demand that has pushed up prices, focusing on those high-margin models contributed $3.2 billion to GM's first-quarter pre-tax profit. Barra said even after the chip shortage eases, GM won't boost vehicle inventories back to prior levels.
While GM has continued to build its highest-profit vehicles, it has hoarded supplies of chips by idling other factories.
Last week, it extended downtime for plants in Kansas and Ontario into early July and late June, respectively, to conserve chips, curtailing output of the Cadillac XT4 and Chevy Equinox SUVs, and the Chevy Malibu saloon.
GM posted a first-quarter net profit of $3 billion, or $2.03 per share, up from $294m or 17 cents per share a year earlier. Excluding items, the company earned $2.25 per share, well above analyst expectations of $1.04 per share.
Revenue in the quarter dipped slightly to $32.5 billion from $32.7 billion. Analysts had expected revenue to be flat at $32.7 billion.
GM said its capital spending budget this year will be $9 billion to $10 billion, and Barra said about $7 billion of that would be focused on electric and autonomous vehicle development.