Strong US demand for trucks and SUVs boosted General Motors' fourth-quarter profits and the company on Wednesday projected higher earnings despite up to a $2 billion hit from the global semiconductor shortage.
The results capped a rollercoaster year for GM and other US automakers that were forced to shut down plants last spring due to the coronavirus pandemic, resulting in a massive hit to second-quarter sales.
But GM saw a surprisingly hot market in the second half of the year.
Carmakers now are dealing with another unexpected problem in the wake of Covid-19: a global shortage of semiconductor chips stemming in part from outsized demand for personal electronics during the pandemic.
GM said the semiconductor shortage would reduce operating profits by between $1.5 billion and $2 billion in 2021.
But the company's full-year forecast is still better than last year, and the supply crunch will not affect investments in electric autos or autonomous driving technology, executives said.
"The semiconductor shortage won't slow our growth plans," GM Chief Executive Mary Barra told reporters, adding that the automaker still expects a "very good" 2021.
GM surprised many industry watchers last month by setting a target of phasing out tailpipe emissions from new light-duty vehicles by 2035.
- Chips go to hottest autos -
The company suffered a big loss in the second quarter, but then enjoyed strong results in the second half of last year amid solid demand and tight vehicle inventories in the United States which helped support prices.
GM reported fourth-quarter profits of $2.8 billion, compared with a loss of $194 million in the same period of 2019.
For all of 2020, GM's profits dropped 4.5 percent to $6.4 billion and revenues fell 10.7 percent to $122.5 billion.
Barra described the semiconductor situation as fluid and said the company was tweaking its production plans and would hold onto some mostly-completed vehicles, not shipping them to dealers until semiconductors could be installed.
GM on Tuesday extended a shutdown of three plants at least through mid-March due to the shortage.
"We're finding solutions every day," she said. "So that's why you see the range of impact -- it's still early days and there's a lot of movement."
Barra said GM expects to meet its full-year targets for production of critical pickup truck and sport utility models, adding that it is prioritizing its most popular vehicles for completion.
"We see the situation resolving this year," Barra said of the semiconductor crunch. "I think it's a little too early to say precisely when it will end."
Barra told analysts GM was pushing ahead with autonomous driving technology. She declined to put a timeframe on commercializing the venture, but said it is "not years away."
She said the company intended to stay "aggressive" on electric auto technology, even though the market is still small in the United States.
GM sees electric vehicles as a way to strengthen its market position in some parts of the United States and also could target European markets, Barra said during a conference call with analysts.
- Bullish on China -
The auto giant projected 2021 operating profits of $10 to $11 billion, compared with $9.7 billion in 2020.
Adjusted profit per share will fall in a range of between $4.50 and $5.25 per share, GM said, below the $5.89 projected by analysts.
Analysts have said the strong US auto market also reflects the boost from government relief spending during the pandemic and a shifting of discretionary money from travel to cars and other big-ticket items.
GM also saw a rebound in China after an anemic first-quarter while that country contended with the worst of the coronavirus.
Barra said GM has been building up its SUV and luxury auto businesses in China and expects the country to hit 30 million vehicles a year in the coming period.
In 2020, China's vehicle sales fell 1.9 percent to just over 25 million, according to the China Association of Automobile Manufacturers.
GM shares fell 2.1 percent to end the day at $54.88. However, shares are still up around 32 percent this year.