The recovery has caught GM and its rivals off guard, and they are paying the price. Automakers cut back on orders for computer chips early last year, and electronics makers, which had strong sales during the pandemic, happily snapped up the oversupply. But when car sales rebounded, it left the industry battling chip shortages.
GM on Tuesday announced the extension of a week-long shutdown at three US plants. The shutdown was scheduled for this week due to chip shortages, but GM now says it will last at least until mid-March.
GM disclosed on Wednesday in its quarterly earnings report that the chip shortage could cut $ 1.5 billion to $ 2 billion from its 2021 earnings, although it expects to keep producing its best-selling and profitable vehicles, like full-size pickups and SUVs.
Actions of GM (GM) it fell more than 5% at the start of trading, as it revealed the cost of missing chips. The shares have risen 10% since January 29, when the company announced that it expects to sell only emission-free vehicles by 2035.
Meanwhile, the company’s guidance included a range of earnings that suggested that earnings for 2021 could fall from 2020 levels. And earnings before special items, such as interest and taxes, should be less than Wall’s predictions. Street.
Last week, GM’s rival Ford (F) said its production in the first quarter would be cut between 10% to 20% due to the shortage of chips. If this extends into the second quarter, it could cost the company between $ 1 billion and $ 2.5 billion in 2021.
GM also reported stronger-than-expected gains in the fourth quarter on Wednesday, which helped its 2020 earnings outperform those of 2019 – despite the pandemic.
The largest automaker in the country had revenues of US $ 2.8 billion in the quarter, excluding special items. This surpassed Wall Street’s forecast of $ 2.6 billion. Quarterly revenue increased 22% to $ 37.5 billion, also exceeding expectations.
Overall, in 2020, the company earned $ 7.1 billion excluding special items, up from $ 6.9 billion in 2019, when a six-week strike cost $ 2.9 billion.
These special expenses in 2020 included a $ 1.2 billion fee to repair airbags made by Takata and a gain in the value of its PSA Group investment, which merged with rival Fiat Chrysler, as well as a gain on its investment in Lordstown. Motors, which plans to use an old GM factory to build electric trucks.
GM ended the year with an increase in fourth quarter sales in China and the United States, its two largest markets, and global sales increased by 4% in the period. Still, full-year sales fell 11% from last year, to 6.8 million. Like GM, most major automakers also reported a drop in sales.
