General Motors posted strong first-quarter earnings and said it’s on track to hit the high end of its full-year profit target despite the computer chip shortage dogging the industry.
The largest US automaker posted net income of $3 billion, about 10 times what it posted in the same quarter a year ago, when it was hit by the beginning of the Covid-19 pandemic. Revenue and vehicle sales fell slightly from a year ago because the global chip shortage and plant closings limited supply of vehicles. International sales also dropped. But the company was able to overcome the drop in vehicles sold by selling a more profitable mix of vehicles. GM accomplished that by using the chips it had on hand to build higher-margin large SUV and truck models. The tight supply of vehicles also improved average pricing, as it reduced incentives to attract consumer buyers and reduced sales to fleet buyers who typically buy vehicles at a discount. Combined, the better mix and better pricing added $3.2 billion to its pre-tax profits during the quarter. And GM’s finance arm also improved pre-tax profits by $1 billion, thanks to the combination of lower interest expense and high used vehicle prices which it enjoyed on leased vehicles returned to the company.
