GM's 2Q Net Profit Drops 40%... Impact of Semiconductor Shortage and China Shock

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] American automaker General Motors (GM) saw its net profit plunge 40% in the second quarter (April to June) of this year due to global supply chain disruptions and sluggish operations in China.

According to the Wall Street Journal (WSJ) and others on the 26th (local time), GM announced in its earnings report that second-quarter revenue rose 5% year-on-year to $35.76 billion (approximately 46.9 trillion KRW), while net profit fell 40% to $1.69 billion. Pre-tax earnings per share were $1.14, falling short of market expectations of $1.23.

The shortage of parts, including vehicle semiconductors, and lockdown measures in China due to COVID-19 are seen as factors that hampered GM. Earlier this month, GM revealed that due to shortages of semiconductors and other raw materials, it had 95,000 unsold vehicles in inventory that could not be assembled by the end of the second quarter. The unusual $87 million loss in China, GM’s second-largest market, also negatively impacted the results.

However, GM maintained its full-year net profit guidance of $9.6 billion to $11.2 billion. It expects to complete and sell all the unsold inventory caused by incomplete assembly within the second half of the year. Mary Barra, GM’s Chief Executive Officer (CEO), forecasted continued sales as inventory levels remain extremely tight and there are no signs of reduced pent-up demand for new vehicles.

Nonetheless, CEO Barra indicated that if economic conditions worsen, the company may enter a 'tightening mode' by reducing discretionary spending and limiting some hiring. While layoffs are not currently being considered, GM’s management stated that due to economic uncertainties, they are taking precautionary measures to manage cash flow.

This content was produced with the assistance of AI translation services.