GM earns $2.8B in Q2, raises full-year forecast

DETROIT — General Motors on Wednesday posted second-quarter net income of $2.8 billion, largely on strong North America results, and said the rest of the year would be more profitable than previously expected even as the global microchip shortage continues to hamper production.

GM earned $2.9 billion in North America, compared with a $101 million loss a year earlier.

The automaker now expects to earn as much as $13.5 billion in adjusted earnings this year, compared with a previous forecast of $10 billion to $11 billion, CEO Mary Barra said in a letter to shareholders.

GM's results disappointed Wall Street with shares falling 8.9 percent to close at $52.72.

Consumer demand and strong performance by GM Financial, the automaker’s captive finance company, helped drive the earnings boost, said CFO Paul Jacobson.

“The chips really represent a little bit more of a lost opportunity of what could have been even better,” he told reporters Wednesday. “The year is actually progressing quite well, and I think we've overcome all of those initial expectations.”

GM's $2.8 billion in net income compares with a $758 million loss during the second quarter of 2020, when the coronavirus pandemic sharply cut production. Its earnings last quarter were dragged down by $1.3 billion in warranty and recall costs, including $800 million related to the Chevrolet Bolt EV.

Global revenue more than doubled to $34.2 billion, from $16.8 billion a year earlier.

GM's adjusted margin climbed to 12 percent, compared with 3.2 percent a year earlier. Adjusted earnings before interest and taxes swung to $4.2 billion, compared with a $536 million loss a year earlier.

GM’s has about 200,000 units of inventory available, about a 25-day supply, Barra told reporters. GM entered July with inventory of only 211,974 vehicles, about half as much as it had at the start of the year.

Several plants in North America have taken spurts of downtime during the quarter, including the automaker's full-size pickup plants in Flint, Mich., Fort Wayne, Ind., and Silao, Mexico. Those plants are now scheduled to go back offline next week, GM said Tuesday.

Until last month, GM had kept production of its lucrative pickup line humming amid the chip shortage, even building some pickups without certain fuel management modules.

Much of the chip crisis depends on the spread of the coronavirus delta variant at semiconductor plants, specifically in Malaysia, Barra and Jacobson said.

“I'm confident the team will be creative and find solutions, but there still is more variability than I'd like to see,” said Barra. “I do think we'll  continue to see impact this year and it will have a tail into next year.”

GM is working on long-term solutions to de-risk its supply chain, such as additional collaboration with semiconductor manufacturers, Barra said.

The automaker earned $15 million in the second quarter from international regions, excluding China, compared with a $270 million loss a year earlier. China equity income rose to $300 million, compared with $200 million a year earlier.

Earnings from GM Financial increased to $1.6 billion, compared with $226 million a year earlier.

Ford Motor Co. last month also posted net income in the second quarter, though overall profit fell by about half.

GM’s U.S. light-vehicle sales rose 40 percent in the second quarter from a year earlier on strong customer demand, but volume was weakened by low inventories because of the global microchip shortage.

Editor's note: GM's China equity income during the quarter rose to $300 million, compared with $200 million a year earlier. An earlier version of this story misstated those figures.