Higher prices for trucks and SUVs helped General Motors make a $2.4 billion profit in the third quarter, but income was 40% less than a year ago due to a shortage of new vehicles due to a global shortage of computer chips.
Profits are down from $4 billion last year as sales plummet and the company loses market share in the United States, its most profitable country. GM shares fell 5% on the news.
Excluding one-time items, the company earned $1.52 per share, beating Wall Street estimates of 98 cents.
Revenue for the quarter fell 25% to $26.78 billion, well below Wall Street’s estimate of $30.72 billion, according to FactSet.
On a conference call with analysts, CEO Mary Barra said she was “absolutely confident” that San Francisco-based GM’s Cruise company will transport driverless passengers for human safety sometime next year. To do this, Cruise still needs final clearance from California regulators.
Barra also told reporters Wednesday that a global shortage of semiconductors, as well as a COVID outbreak at supplier factories, hit the company during the third quarter. “The situation is still somewhat volatile,” she said.
However, GM is seeing some improvement in the current quarter and expects additional supplies in the first three months of 2022, it said. “We’ll see that improve, but we’ll see that effect next year,” Barra said.
GM said it expects to produce about 200,000 fewer vehicles in the second half of this year than in the first half, with most of the impact occurring in the July-September period.
Chief Financial Officer Paul Jacobson said fourth-quarter production should look more like the second quarter, which was stronger than the third. But he said GM faces inflation in commodity prices and additional investment in new products and manufacturing.
Barra said she’s spoken with the CEOs of most major chip makers, and the companies are working on strategies to make sure shortages don’t happen again. “I think we will definitely see changes to ensure we get the right offer,” she said.
GM’s third-quarter earnings came even though US sales for the quarter were 33% lower than a year ago. The company lost 3.8 percentage points of its US market share, according to Edmunds.com.
“The ongoing disruption to supply chains caused by chip shortages has been particularly harsh on General Motors, which appeared to be struggling with the largest drop in sales and market share compared to its Detroit 3 peers in the third quarter,” said Evan Drury, Edmunds senior manager. of visions.
But Barra said she expects GM’s market share to recover when plants return to normal production. “We are selling everything we can. I wish we had more vehicles,” referring to a strong market share for pickup trucks and SUVs. “We have for years been the #1 sales leader in the United States, and I am confident with our product line and some new products to come that we will bring it back as soon as supplies become available.”
Consumer willingness to pay high prices for rare cars has kept General Motors cash flowing. Edmunds said the average selling price paid for a General Motors vehicle exceeded $50,000 for the quarter, up more than 16 percent from a year ago. Barra said she expects prices to rise once supplies grow.
With the expected improvement in chip supply, GM increased its full-year net income guidance to a range of $8.1 billion to $9.6 billion. In the second quarter it was $7.7 billion to $9.2 billion.