U.S. automaker General Motors (GM) doubled its forecast for production cuts in the second half of this year. As announced by GM’s CFO, Paul Jacobson, at a conference hosted by RBC Capital Markets, the semiconductor shortage shock will intensify.
Jacobson is concerned that the overall shortage of North American auto deliveries could reach 200,000 units in the second half of this year, double the 100,000 units previously forecast. The company released its second-quarter results a month ago with a forecast of 100,000 units.
According to the report, North American deliveries are expected to be limited to 1.1 million units in the second half of the year.
Jacobson said, however, that GM’s auto production was expected to have less of an impact than expected in January, but that the outlook for the year is still positive.
General Motors raised its overall earnings forecast for this year in its earnings announcement last month.
Earnings were revised upward by $1 billion to $11 billion, to $13.5 billion from $11.5 billion. Earnings per share were revised upward from $4.50 to $5.25 to $5.40 to $6.40.
“We expect annual unit deliveries to be higher than expected in January,” Jacobson said.
GM announced this week that it would reduce production at nearly all of its North American plants.
Despite the production interruptions, the upward revision of profit forecasts indicates that the company has pricing power.
Demand for automobiles has surged since the lockout of the new Coronavirus infection (COVID-19) was lifted, while production has declined amid a shrinking supply chain, and inventories have declined, giving automakers more room to raise prices.
GM and other automakers have more control over prices now than ever before.
This also contributes to inflation anxiety.
Meanwhile, Jacobson anticipates that next year will be a “more stable” year for the semiconductor industry.
According to consulting firm Alix Partners, global auto industry sales this year will be $110 billion lower than they would have been had there been no semiconductor shortage, due to the shortage of semiconductors for automobiles.
GM stock rose $1.07 (2.21%) to $49.49 despite the stock market’s weakness on the same day.