NEW YORK – Despite a hit from the semiconductor crunch in the fourth quarter, General Motors (GM) on Tuesday projected a highly profitable 2022 based on strong consumer demand in the face of rising inflation.
Profits fell in the final quarter of 2021 as GM saw global car sales sink. But the big US automaker still managed to notch a record US$10 billion in annual profits as tight retail inventories lifted prices.
GM signalled it expects comparable profits in 2022 in spite of cost pressures in commodities, freight services and labour.
Executives cited robust consumer hunger for new vehicles, with pent-up demand for “several million” vehicles driving the market, according to chief executive Mary Barra.
“We expect to see strong pricing and that will continue in 2022,” she said in a conference call with reporters.
“We continue to have low inventory so those fundamentals are even more important than overall inflation from a vehicle price outlook,” Barra said.
Barra also characterised the semiconductor supply outlook as gradually improving, though she added the caveat that additional Covid-19 outbreaks or another disruption also looms as a possibility.
“This is our best estimate,” Barra said on a conference call with analysts. “This is what we think we’re going to be able to do.”
In light of this improvement in semiconductors, GM projected a 25% to 30% increase in auto production in 2022.
Higher costs
The big US automaker earned a profit of US$1.7 billion for the quarter ending December 31, down 38.7% from the final three months of 2020 as revenues dropped 10.5% to US$33.6 billion.
But for the full year, GM reported US$10 billion in profits, up 55.9% from the 2020 level.
In the face of the chip shortage, GM has focused production on its most profitable vehicles, such as full-size trucks and sport-utility vehicles.
GM projected 2022 earnings of between US$9.4 billion and US$10.8 billion.
That outlook is in spite of $2.5 billion in increased commodity and logistics costs in 2022.
Chief financial officer Paul Jacobson said the range in GM’s profit forecast reflects possible fluctuation due to shifting interest rates or commodity costs.
But Jacobson described current dynamics as a “very very strong business environment”.
‘Hello car’
Barra also cited recent progress on GM’s autonomous technology and its build-out of electric vehicle capacity following a series of major product launches and factory announcements.
On Tuesday, GM’s autonomous venture Cruise opened up a “sign up page” for consumers to take a driverless ride.
A video on Cruise’s website showed several riders in San Francisco gawking over the technology as they rode in a vehicle. One of the clips showed a couple greeting the self-steering vehicle as they entered.
“Hello car,” the man says.
“This feels weird,” says another.
Barra was effusive, likening her experience to “riding with an experienced driver who’s paying attention all the time”.
But as a result of these multibillion dollar investments, GM has opted against restoring the investor dividend, she said.
Shares rose 1.1% to US$54.68 in after-hours trading. – AFP, February 2, 2022
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