GM's Record Q2 Operational Profit Dragged Down By Headwinds

General Motors GM already had a hard job by having to follow up Ford Motors F, and Tesla Inc TSLA who exceeded estimates with their earnings reports last week. It is also weathering a global semiconductor chip shortage, having confirmed three North American full-size pickup truck assembly plants will be shut down next week. On Wednesday, it missed Wall Street expectations for its second quarter despite reporting a record operating profit. However, it did raise 2021 guidance and confirmed the arrival of two electric vehicles.

The Global Semiconductor Shortage Remains Complex

Along with causing factory shutdown, this crisis is expected to trim billions off the industry's earnings this year. Next week, Flint, Michigan; Fort Wayne, Indiana; and Silao, Mexico will again be idle, only a week after they resumed production that was suspended for the same reason, only further showing the uncertain dynamics of the supply shortage. During the forced break, unfinished vehicles will be completed and shipped to dealers from the impacted plants.

Q2 Figures

Revenue exceeded the expected $30.9 billion as it amounted to $34.17 billion. On the other hand, adjusted EPS of $1.97 came lower than the expected $2.23 as they were drained by warranty recall costs of approximately $1.3 billion that include $800 million brought on by the recall of Chevrolet Bolt EV due to fire risks, the second time this year.

On an unadjusted basis, net income was $2.8 billion compared with last year's quarter loss of $758 million owed to the pandemic that caused shutdowns of its factories. Pretax adjusted earnings amounted to $4.1 billion for the second quarter, a record for the second quarter, topping GM's adjusted earnings before interest and taxes of $3.9 billion, or $1.86 a share, in 2016.

The Electric Pickup Is Coming

GM CEO Mary Barra confirmed the arrival of two new electric vehicles to GM's commercial lineup, without disclosing the timing or other details. GM will create a full-size battery-electric cargo van for Chevrolet as well as a medium-duty truck for service and utility vehicles such as school buses. They will be powered by GM's Ultium Cells and Hydrotec fuel cells. These two EVs are part of GM's plan to increase its investment in electric and autonomous vehicles by 30% to $35 billion through 2025.

Startups such as Amazon-backed AMZN) Rivian as well as legacy automakers such as Ford Motor and the EV pioneer Tesla Inc will have their electric pickup on the market by then.

Next year, we're also in for a luxurious electric pickup by Hercules Electric Vehicles and a tech-savvy model by Atlis Motor Vehicles, both of which will be equipped by the solar fusion TerraVis, intellectual property of Worksport Ltd. WKSP WKSPW that just received approval to list on the tech-heavy NASDAQ, As an established company contributing cutting-edge research on renewable solar energy to the EV table and a balance sheet with more than $20,000,000 million in cash and cash equivalents, free of long-term debt, it is now finally where it belongs with other revolutionary tech companies that provide us with hope for a greener future.

Outlook

The legendary automaker raised its prior adjusted full-year guidance of $10 billion to $11 billion to a new range between $11.5 billion and $13.5 billion. It also expects commodity costs to rise by $1.5 billion and $2.0 billion along with lower earnings from its financial arm as it will continue to see the impact of the chip shortage both this year and into 2022.

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