(Bloomberg) — General Motors Co. reported weaker second quarter profit than analysts’ estimates as semiconductor shortages kept production volumes in check. The automaker also warned it is bracing for tougher times ahead.
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Noting “concerns about economic conditions,” Chief Executive Officer Mary Barra said in a shareholder letter Tuesday that GM is taking measures to guard cash flows and rein in costs by cutting discretionary spending and placing limits on hiring.
“We have also modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” the CEO said.
GM kept intact its full-year earnings guidance, reflecting robust demand for its highest-priced vehicles and signaling optimism it can procure sufficient quantities of chips.
Shares of the Detroit-based carmaker fell 1.3% in premarket trading to $34.07 as of 6:55 a.m. in New York. The stock had declined about 41% this year as of Monday’s close.
GM’s profit in the latest quarter totaled $1.14 a share, less than the $1.31 consensus estimate of analysts compiled by Bloomberg and also below the $1.97 a share it earned a year ago.
While production volumes remain constrained, the company benefitted from higher sticker prices on the SUVs and trucks it could manufacture. Sales came to $35.76 billion, above analysts’ estimates for $34.81 billion.
The automaker sees 2022 adjusted earnings before interest and taxes of $13 billion to $15 billion, unchanged from its previous projection. It also expects adjusted profit of $6.50 to $7.50 a share.
“This confidence comes from our expectation that GM global production and wholesale deliveries will be up sharply in the second half,” Barras said.
GM’s North American business came to $2.3 billion in adjusted earnings before interest and taxes, a drop from $2.9 billion a year ago. The company said it remains on track to cut down its inventory of partially completed vehicles, which totaled about 95,000 as of June 30.
While industrywide sales in the US are on pace to fall 17% this year to 14.4 million — the lowest level in a decade — GM has kept profits growing by raising prices. The company’s average vehicle sold for more than $50,000 leading into the quarter.
In China, where a wave of Covid-19 cases has led to shutdown of factories and kept consumers home, GM swung to a loss of $87 million from its joint venture, compared with a $276 million profit this time last year.
(Updates with additional CEO comments from seventh paragraph.)
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