GM Boosts 2021 Profit Outlook, Offers 2022 Forecast

The fourth quarter was good for General Motors.

GM Chief Financial Officer Paul Jacobson said on Wednesday the automaker expects its adjusted profit before interest and taxes (EBIT) for the year to be nearly $ 14 billion, up from previous forecast of $ 11.5 billion to $ 13.5 billion.

In October, GM raised its annual adjusted EBIT forecast, saying it would be at the high end of its range of $ 11.5 billion to $ 13.5 billion. That range was higher than GM’s initial outlook earlier this year, amounting to $ 10 billion to $ 11 billion.

“We have seen continued consumer strength, obviously there is a wind of caution with the omicron variant that we are all watching very closely,” Jacobson said in an interview with senior equity research analyst. from Credit Suisse, Dan Levy.

Earlier on Wednesday, the United States confirmed its first case of omicron, the new variant of the coronavirus seen earlier in South Africa, in northern California.

Other “winds of caution” included a continued global shortage of semiconductor chips since February. Chips are used in a variety of auto parts. The severe shortage of chip parts hampered year-round production, leaving most car dealers’ batches sterile and prices high.

But Jacobson said it’s getting a little easier to get the chips now, which is helping to boost sales.

“We have experienced quite a bit of cost advantages and the volumes have trended higher than expected, primarily in chip availability,” Jacobson said. “Our fourth quarter arrives stronger than we expected just a month ago.”

GM's newly hired CFO Paul Jacobson is joining automaker Delta.

The chip shortage has prompted GM and others to slow down entire factories or build vehicles right next to chip parts and wait for the parts to arrive before they finish production and ship the vehicles to dealerships.

But Jacobson said GM sees signs that the semiconductor chip shortage will improve throughout next year. GM will provide guidance on its expected 2022 earnings on Feb. 1, Jacobson said. But he offered some clues on Wednesday.

“We see the ability to generate 10% margins in 2022 as we continue to move the business towards electric vehicles and the platform innovator,” said Jacobson.

In September, GM said that by switching to selling all-electric vehicles by 2035, it would transform into a software company that makes hardware: cars. These cars will be a platform to provide software developed by GM that provides services to consumers beyond their vehicle.

The bad news is with car buyers. GM expects strong consumer demand for new cars to continue next year, but the vehicles will not be near a “normalized inventory” level at all, Jacobson said.

“I don’t think we’ll get there by the end of 2022 even if we stabilize in chips,” Jacobson said of inventory levels.

This means that the rise in vehicle prices, which this year has not only seen little to no discounts, but even cases of dealers selling them for more than the sticker price, will continue into the next year.

“We see inflation everywhere,” Jacobson said. “We need to make sure we continue to provide consumers with quality vehicles that they value and want to buy. So we need to continue to monitor the consumer. But our expectations right now are that 2022 will be a strong business year. “

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Contact Jamie L. LaReau at 313-222-2149 or Follow her on twitter @jlareauan. Read more on General Motors and subscribe to our automotive newsletter. Become a subscriber.

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