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GM’s Earnings Take 40 Percent Hit in Q3 2021 Due to Chip Shortage

The Drive logo The Drive 10/27/2021 By Rob Stumpf, The Drive
General Motors' latest financial results show that the global semiconductor shortage is still wreaking havoc on the auto industry. © Provided by The Drive General Motors' latest financial results show that the global semiconductor shortage is still wreaking havoc on the auto industry.

General Motors' latest financial results show that the global semiconductor shortage is still wreaking havoc on the auto industry. The manufacturing giant revealed on Wednesday that its total net income for the third quarter of 2021 fell more than 40 percent compared to this time last year, mostly attributed to chip-related parts shortages and production disruptions.

Moreover, GM also lost significant profits in its most profitable market: the United States. The sales of GM-branded vehicles fell by nearly 33 percent versus the same period last year, resulting in a market share loss of 3.8 percent. In all, its profits in North America as a whole were significantly reduced, declining by more than half despite being bolstered by the sales of SUVs and trucks.

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GM's revenue in 2021 so far has swelled to approximately $26.8 billion--$26 million from GM's Cruise, $3.4 billion from GM's financial services, and $23 billion from automotive sales. This is before operating expenses, which have decreased GM's overall operating margin to 10.9 percent, a drop of 4 percent.

Despite this slowdown, GM is still on track to beat its total earnings from 2020, barring any significant losses in its fourth quarter. To this point in 2021, GM has posted earnings of nearly $11.5 billion, which is more than its total earnings of $9.7 billion in 2020. GM CEO Mary Barra says the auto group believes it will approach the high side of its expected year-end earnings, which is estimated to be between $11.5 and $13.5 billion. According to Automotive News, Barra said the current pace was achieved by focusing production efforts on high-margin vehicles like full-size pickups and SUVs, and there's also inflated vehicle pricing due to inventory shortage.

"Our third-quarter 2021 results clearly illustrate the strength of the underlying business that is funding our future, especially when you put them in the context of the calendar year," wrote CEO Mary Barra in her letter to shareholders. "The quarter was challenging due to continuing semiconductor pressures. But it also includes very strong results from GM Financial, the recall cost settlement we reached with our valued and respected supplier and JV partner LG Electronics, and $0.3 billion in equity income from our joint ventures in China."

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While GM is facing massive production complexities, it hasn't let those problems break its stride towards electrification.

In November, GM will host a grand opening of Factory ZERO, its EV production facility at the former Detroit-Hamtramck assembly plant. The GMC Hummer EV, Chevrolet Silverado EV, and Cruise Origin will all be built within its walls. Additionally, GM is still planning to open two battery plants to manufacture its Ultium cells--one in Lordstown, Ohio, and the other in Spring Hill, Tennessee. Then, recently, the automaker announced it has also begun production of its BrightDrop electric delivery vans for FedEx and has brought on Verizon as a customer for a smaller commercial vehicle.

"I am very proud of the team that has delivered these results and committed so strongly to our growth strategy. This includes our dealers and suppliers, who are critical to our success," said Barra. "Together, we are developing new technologies, incubating new businesses, delivering great products and services for our customers, and generating strong results that we can reinvest in our future.

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