Thursday, June 8, 2023
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GM revenue increases due to improved supply chain issues

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CNN business

General Motors says its supply chain issues are improving. As a result, the company was able to post better-than-expected profits, although sales forecasts were not met.

America’s largest automaker said it was able to offload about 75% of the approximately 90,000 vehicles that could not be completed due to missing parts by the end of June.

“We are delivering on our commitments and confirming our full-year guidance despite a challenging environment as demand for GM products remains strong,” said GM CEO Mary Barra.

Earnings for the quarter came in at $2.25 per share, up 48% year over year and well above the $1.88 per share forecast by analysts polled by Refinitiv . But sales did rise 52% to a record high $41.9 billion, just below forecasts of $42.2 billion.

GM said its North American factories operated at 103% capacity throughout the quarter, a dramatic improvement from a year earlier when they were operating at just 60% of capacity due to chip shortages and other supply chain issues that caused widespread temporary shutdowns Capacity factories could run.

“Chips seem to be getting a little bit better,” CFO Paul Jacobson said in a conversation with the media. “There are still hiccups from time to time.” He said the ability to clear many of the vehicles, which were nearly complete but missing parts, is a sign of the improved environment.

Barra also agreed that the chip situation is improving, but warned during an interview on CNBC that “I wouldn’t say we’re completely out of it yet. It’s more volatile than I would expect at this point.”

The company’s global car and truck deliveries rebounded to 1.5 million, up 17% year over year and 8% above second-quarter deliveries. But for the first nine months of the year, deliveries are still 9% below the same period of 2021.

There are growing concerns, both in the United States and around the world, that the economy could slide into recession, which usually results in a drop in auto sales. But Jacobson said the company sees no sign of a drop in demand, which could coincide with an economic slowdown.

“In the short term, we really don’t see anything,” he said. He said inventories were slightly higher, but given the increased pace of production, that’s no surprise.

“We’re certainly aware of the headwinds out there,” he said. “We cannot ignore what others are saying and seeing out there. We continue to see strong demand. The best we can do is be prepared.” He said the company is not currently planning layoffs like those announced at Ford and Tesla.

Barra said during her CNBC interview that tighter inventories will allow the company to adjust faster than in previous recessions when an economic slowdown occurs.

The company also enjoyed a rebound in China, where it had reported a $100 million loss from its joint ventures with Chinese automakers in the second quarter amid lockdowns due to a surge in Covid cases there. It made $300 million in that country, matching last year’s results.

GM (GM) shares are up 3% in premarket trading on strong earnings and full-year earnings guidance of $6.50 and $7.50 per share, giving the company a solid shot at forecasting 6, to surpass $78 per share.

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