GM Anticipates Up to $3B Hit from Chip Shortage, Inflation

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General Motors said on Wednesday the ongoing semiconductor shortage and rising commodity inflation could bring in a $2 billion to $3 billion headwind in the second half of the year.

What Happened: The number one U.S. automaker expects chip shortage to continue in the second half of 2021 with the third quarter getting hit more than GM had previously estimated, CEO Paul Jacobson told investors at the Deutsche Bank’s Global Auto Industry Conference held virtually.

Jacobson said the automaker expects the low inventory environment to continue well into 2022 if the demand stays strong.

The higher second-half expenses are primarily due to commodity inflation that will force it to spend $1.5 billion to $2 billion more than it did in the first half of the year, Jacobson said.

Why It Matters: The Detroit-based automaker had earlier in the day said it now expects its first-half EBIT-adjusted to be between $8.5 and $9.5 billion due to continued strong demand and improved near-term production from the pull forward of semiconductors from the third quarter, up from an estimated $5.5 billion.

The ongoing chip shortage started last year after automotive and appliance factories reopened following lockdowns and demand pulled back up more than expected. Automakers rushed to make their most profitable models on priority and face record-low inventories.

On Wednesday the automaker said electric and autonomous vehicle spending will increase to $35 billion through 2025, a 30{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} increase from last year’s announced plans. It is also raising its earnings guidance for the first half of the year.

The additional money will be used to expand its electric vehicle rollout and accelerate its battery and fuel cell technology production, including two new U.S. battery plants in addition to two under construction, by 2025.

Price Action: GM shares closed 1.56{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} higher at $61.76 on Wednesday.