GM POSTS $2.8B PROFIT, BUT CAUTIOUS TONE SINKS SHARE PRICE
Techlife News|Techlife News #510
General Motors posted a healthy $2.8 billion second-quarter profit this week, but its cautious outlook for the rest of the year spooked investors.

The Detroit automaker made the strong profit despite a global shortage of computer chips that have forced it and other companies to temporarily close factories.

While GM raised its outlook for the year, it also cautioned about high commodity prices and lower production due to the chip shortage, and it warned that the highly contagious delta variant of the coronavirus could hamper its supply chain.

The cautious tone rattled investors, who pushed GM shares down almost 9% after the announcement.

Chief Financial Officer Paul Jacobson predicted that GM would produce 100,000 fewer vehicles in the second half of the year compared with the first, even as other companies forecast improvements in semiconductor production. GM said it managed the shortage well and was able to divert scarce chips to factories that make higher profit pickup trucks and large SUVs.

But Edward Jones Industrials analyst JeffWindau said investors are building some uncertainty into GM’s stock price after the company forecast $3.5 billion to $4.5 billion worth of increased costs in the back half of the year.

“Obviously there are some shutdowns, and there’s just concerns with how things are evolving,” Windau said. “Expectations have been rising over the last couple of months. This just kind of comes back and potentially resets the bar a little bit.”

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