GM's second-half production loss doubles from prior forecast

DETROIT -- General Motors stands to lose about 200,000 vehicles in the second half of the year because of the ongoing microchip shortage, CFO Paul Jacobson said Friday, doubling last month's projection.

But the automaker is maintaining its full-year financial guidance and expects a more stable chip situation in 2022.

Most of the production losses are occurring in the third quarter, said Jacobson. Next week, only five of GM's North American plants will be running, with four of those full-size pickup and SUV plants and the other a Chevrolet Corvette factory. But the automaker has intermittently shut down production of its lucrative full-size pickups over the past few months.

Despite the production halts, GM is maintaining its guidance of $11.5 billion to $13.5 billion in adjusted earnings this year, Jacobson said at RBC's Global Industrials Conference.

Much of GM's production losses are related to COVID-19 cases in Southeast Asia, where microchips are processed.

"We've recently seen upwards of 60 percent production restrictions," he said.

But the situation has changed from the beginning of the year, when limited chip fabrication capacity hurt vehicle production, he said.

"What we're seeing right now is really in the back-end processing facilities that are in Southeast Asia," he said. "The good news for that is we typically see the throughput at those facilities run faster than the fabrication."

Once plants in Southeast Asia can boost production, Jacobson expects a more consistent flow of chips.

Consumer demand and credit have been strong, and GM has launched tools to help with preorders and vehicle tracking.

"What we really don't want to do … is drive a level of COVID austerity into the business that slows it down from where we are," said Jacobson. "It's important as a finance team and as a leadership team that we don't convey a level of panic.

"The business, through it all, is actually performing ahead of where we expected it to be at the beginning of the year."

Jacobson said GM and supplier LG continue to work on a remedy for the Chevrolet Bolt EV and EUV, after the automaker recalled all Bolts for fire risk.

"The No. 1 focus right now is to get the production line fixed, the manufacturing process cleaned up and get back into cell production and ultimately get a path for these vehicles to be repaired," he said.

GM and LG are having "high level" conversations about handling GM's $1.8 billion hit for the recall. The recall charges do not change GM's full-year guidance, but "we do expect that we will get reimbursement for that," Jacobson said.