GM Lifts Profit Outlook On Strong Pricing Despite Chip Shortage

General Motors lifted its 2021 profit forecast Wednesday as the semiconductor shortage limits car inventories and drives up vehicle prices.

The big US automaker reported a profitable second quarter after losing money in the year-ago period, propelled by higher US car sales, as well as a big jump in GM's financing arm, which provides loans to consumers to purchase cars.

Executives described the global semiconductor shortage as "fluid," leading to curtailments at some factories.

The chip crunch has left GM's auto inventories at about 25 days of supply, a "pretty lean" level, said GM Chief Executive Mary Barra in a conference call with reporters.

"We see a very strong consumer. We've seen incredible performance from GM Finance," Chief Financial Officer Paul Jacobson told reporters. "The chips really represent a little bit of a lost opportunity of what could have been even better."

The big US automaker now expects full income of between $7.7 billion and $9.2 billion, up from the prior range of between $6.8 billion and $7.6 billion. However, the full-year forecast still came in below some analysts' expectations.

Profits were $2.8 billion, compared with a loss of $806 million in the 2020 period that was marred by Covid-19 restrictions. Revenues more than doubled to $34.2 billion.

With semiconductors scarce, GM has sought to protect its most in-demand North American truck and sport utility vehicles, enabling it to boost its outlook after strong sales in the first half of the year.

The global shortage stemmed initially from extreme demand for chips during the pandemic caused by higher sales of game consoles, computers and other electronics.

But the problem has been exacerbated by supply chain issues, such as a fire at a key Japanese plant and the winter electricity crisis in Texas that harmed production.

Higher Covid-19 cases in Malaysia have also slowed chip production there, GM executives said.

The semiconductor situation "really depends on what's going on with the Delta variant," Barra said. "We'll continue to see impact this year and it will have a tail into next year."

Barra said the supply crunch would not affect upcoming launches of new electric vehicles such as the GMC Hummer and the Cadillac Lyriq SUV.

Since the November election of US President Joe Biden, Barra has pivoted GM to an aggressive program oriented around electric vehicles (EV) in anticipation of stronger climate change mitigation policies.

The company in June significantly boosted its EV and autonomous vehicle investment push, lifting spending plans by 30 percent to $35 billion through 2025.

But GM in late July announced a second recall of the all-electric Chevrolet Bolt to address a battery defect blamed for recent car fires. The recall added $800 million in second-quarter costs.

Barra said in a television interview that the Bolt's problems were due to "two rare manufacturing issues" in the same battery cell, adding that GM's upcoming EV launches employ a different battery technology.

"We're going to address it," Barra said on CNBC. "We're going to do the right thing for our customers."

GM's forecast translated into full-year profits of between $5.40 and $6.40 per share, below the $6.42 estimated by Wall Street analysts.

Shares fell 5.9 percent to $54.14 in early trading.