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The rebound has caught GM and its rivals off guard, and they are paying the price. Automakers slashed orders for computer chips early last year, and electronics makers, which had strong sales during the pandemic, luckily grabbed the oversupply. But when car sales rebounded, it left the industry struggling with a shortage of chips.
GM on Tuesday announced the extension of a weeklong shutdown at three North American factories. The shutdown was expected this week due to the chip shortage, but GM now says it will last until at least mid-March.
GM revealed in its quarterly earnings report on Wednesday that the chip shortage could cut 2021 profits by $ 1.5 billion to $ 2 billion, even though it plans to keep production of its best-selling and best-selling vehicles. profitable, such as pickup trucks and full-size SUVs.
Actions of GM (GM) fell more than 5% early in the session after revealing the cost of the chip shortage. Shares had risen 10% since Jan. 29, when the company said it expected to sell only zero-emission vehicles by 2035.
Meanwhiie, the company’s forecast included a range of earnings that suggested profits for 2021 could fall from 2020 levels. And earnings before special items, like interest and taxes, are expected to be lower than Wall Street’s forecast. .
Last week, its rival GM Ford (F) said its first-quarter production would be cut by 10-20% due to the scarcity of chips. If this continues into the second quarter, the business could cost between $ 1 billion and $ 2.5 billion in 2021.
GM also reported stronger-than-expected fourth quarter results on Wednesday, which helped its 2020 profit to beat 2019 profit – despite the pandemic.
The nation’s largest automaker earned $ 2.8 billion in the quarter, excluding special items. This topped Wall Street forecast by $ 2.6 billion. Quarterly revenue increased 22% to $ 37.5 billion, also beating expectations.
In total, in 2020, the company earned $ 7.1 billion excluding special items, up from $ 6.9 billion in 2019, when a six-week strike cost it $ 2.9 billion.
Those special charges in 2020 included a $ 1.2 billion charge for repairing airbags manufactured by Takata, and a gain in value from its investment PSA Group, which merged with rival Fiat Chrysler, as well as a gain on its investment in Lordstown Motors, which plans to use a former GM plant to build electric trucks.
GM ended the year with increased fourth-quarter sales in China and the United States, its two largest markets, and global sales increased 4% during the period. That left full-year sales down 11% from a year ago, to 6.8 million. Like GM, most of the major automakers also reported declining sales.
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