General Motors Co. saw its way through several supply constraints last year and came out more profitable and ready to accelerate its electric vehicle plans.
GM made $10 billion in net income last year, up from 2020's $6.4 billion despite a global semiconductor shortage that cost the automaker weeks of production at some plants and cut deeply into inventory levels on dealer lots. But with high demand, the shortage also allowed GM and other automakers to sell vehicles at record-high prices, bolstering profits.
Heading into 2022, GM CEO Mary Barra wrote to investors that the outlook on semiconductors in the U.S. and China is "improving" and GM is expecting its net income to range from $9.4 billion to $10.8 billion and adjusted earnings to be in a range of $13 billion to $15 billion. Additionally, GM is pulling ahead "significant investment into the 2022 to 2025 timeframe," Barra said on a call with analysts Tuesday.
As it battled through the semiconductor shortage and other supply issues that arose during the pandemic, GM still spent billions in the last couple of years to transition its portfolio of plants and vehicles and enter a phase where it could start selling more EVs. Now, GM is planning to deliver 400,000 EVs in North America over this year and next year.
"While the supply chain issues are a dark cloud over the GM story, the Street is laser focused on the EV strategy and hitting targets in 2022. We believe overall this quarter and outlook was a step in the right direction for Barra & the team," said Dan Ives, senior equity analyst at Wedbush Securities, in a statement.
GM is focused on investing in EV development and does not plan to reinstate its dividend.
"The clear priority is to accelerate our EV plan and drive growth," Barra told analysts Tuesday. "And we want to maintain maximum flexibility to invest as opportunities arise across our growth platforms."
As of now, GM plans to spend $35 billion on EVs and autonomous vehicles by 2025.
Since 2020, GM announced investments that totaled more than $14 billion in 10 North American sites to increase manufacturing capacity to make 1 million EVs by 2025, which includes 600,000 full-size electric trucks.
GM just announced last week it plans to invest $7 billion in Michigan with $6.5 billion going for the EV future. The automaker's Orion Assembly plant in Lake Orion will receive $4 billion to transition into an EV truck plant. And, with partner LG Energy Solution, GM will invest $2.5 billion to build a battery cell manufacturing plant in the Lansing area.
"I can tell you right now 1 million units in North America won't be enough to meet the steep inflection in demand that we expect starting the mid-decade for our EVs; that's why we will continue to convert ICE capacity to EVs and plan to invest in a third EV truck plant," Barra said.
Outside of Orion, GM has converted its Detroit-Hamtramck plant for production of the electric Chevrolet Silverado and GMC Hummer EV and Sierra EV pickups.
On the third truck plant, Barra said: "We are formulating plans for the truck plant right now. And we will share more as we work through the details."
Barra noted GM's recently revealed Silverado arriving next year has more than 110,000 reservations so far, including from more than 240 fleet operators. GM also has 59,000 reservations for the recently released Hummer EV pickup truck and the coming Hummer EV SUV. In addition,GM has more than 25,000 reservations for its BrightDrop electric cargo vans.
GM's Silverado will arrive in 2023, a year after Ford Motor Co.'s electric F-150 Lightning comes out. Electric versions of the Chevrolet Equinox and Blazer will reach the market in 2023.
GM has started to deliver its Hummer EV pickup and this spring the electric Cadillac Lyriq crossover, being built in Spring Hill, Tennessee, will hit the market. Meanwhile, production of the Bolt EV and EUV at Orion Assembly remains down through February as GM works through a recall on that product and prioritizes new batteries for recalled Bolts. Barra said teams are working to resume Bolt production "as soon as possible."
To support all of these EVs, GM and LG are building four U.S. battery cell manufacturing sites. The partners have announced the location for three of those plants and they plan to announce the location of the fourth plant in the first half of this year, Barra said.
Beyond EVs, GM is also focused on promoting the moves being made at Cruise LLC, the autonomous vehicle company in which GM has a majority stake. Ahead of GM's earnings release Tuesday, Cruise announced it has launched a free driverless service for San Francisco consumers.
"Despite the supply chain challenges that took a toll on its Q4 earnings, GM continues to stay on message by focusing on its aggressive plans for electrification and autonomous technology," said Jessica Caldwell, Edmunds' executive director of insights, in a statement. "Although the EV market is still a small percentage of total sales in the U.S., GM's push to establish dominance in the space make sense given that its volume products aren't slated to hit until 2023 and its crosstown rival will likely gobble up much of the EV attention this year with its F-150 Lightning launch."
GM's revenue for 2021 was $127 billion, up from the $122 billion the automaker made in 2020. GM met its projected guidance of $14 billion in adjusted earnings before interest and taxes for the year.
In the fourth quarter, GM tallied $1.7 billion in net income on revenue of $33.5 billion. In the fourth quarter of 2020, GM earned $2.8 billion in net income on revenues of $37.5 billion.
GM's net income margins for the year were 7.9%. Pre-tax earnings in GM North America totaled $10.3 billion in 2021. GM International's pre-tax earnings were $827 million.
GM's North American profits will give about 42,500 U.S. hourly workers up to $10,250 in profit-sharing. Eligible workers can expect to see the payments in their Feb. 25 paychecks.
The results come after GM earlier this month reported sales of 2.2 million vehicles in 2021, down 13% from 2020 as the automaker battled a chip shortage that crunched inventory levels on dealer lots, especially in the second half of the year. GM fourth-quarter sales dropped 43% in the fourth quarter. The automaker "vastly underperformed the overall market, which was down 21% in the quarter," leading GM's market share to fall to 13.2%, Cox Automotive wrote in a sales analysis this week.
The lack of GM inventory enabled Toyota Motor North America to dethrone the Detroit automaker as the leading U.S. automaker for the first time in 90 years.
Inventory levels on the ground are supposed to remain tight for most of the year. GM CFO Paul Jacobson told analysts GM ended the year with 200,000 units in U.S. dealer inventory.
"The chip shortage was not all bad for automakers and their dealers. Despite lower volume, profit margins were hefty," said Michelle Krebs, executive analyst at Cox Automotive, in a statement. "Even though GM was beat by Toyota in sales in the U.S. for the first time, GM was able to slash incentives and boost transaction prices."
Krebs noted that in the fourth quarter, the automaker cut incentives 65% and its average transaction price rose 19% to nearly $54,000.
"GM wisely focused its production on high-ticket models, some of which had sales gains as well as higher prices," she said. "That proved a winning combination."
Ford Motor Co. reports earnings Thursday. Stellantis NV reports Feb. 23.
