General Motors says its supply chain issues are improving. That allowed the company to post better-than-expected earnings despite falling short of revenue forecasts.
America’s largest automaker said that by the end of June, it had been able to clear out of inventory about 75% of the roughly 90,000 vehicles it had not been able to complete because of missing parts.
“We’re delivering on our commitments and affirming our full-year guidance despite a challenging environment, because demand continues to be strong for GM products,” said GM CEO Mary Barra.
Its earnings for the quarter came in at $2.25 a share, up 48% from a year earlier and far better than the $1.88 a share forecast by analysts surveyed by Refinitiv. But revenue, while up 52% to a record$41.9 billion, was just short of forecasts of $42.2 billion.
GM said its North American factories ran at 103% capacity throughout the quarter, a dramatic improvement from a year earlier when they were only able to run at 60% of capacity because of chip shortages and other supply chain issues that caused widespread temporary shutdowns at its factories.
“Chips seem to be getting a little bit better,” said CFO Paul Jacobson in a call with the media. “There are still hiccups from time to time.” He said the ability to clear out many of the vehicles that had been almost complete but missing parts was a sign of the improved environment.
Barra also agreed the chip situation is getting better, but cautioned during an interview on CNBC that “I wouldn’t say we’re completely out of it yet. It’s more volatile than I would expect at this point.”
The company’s worldwide car and truck deliveries rebounded to 1.5 million, up 17% from a year earlier 8% above second quarter deliveries. But for the first nine months of the year deliveries are still 9% below the same period of 2021.
There are rising concerns about the economy falling into recession, both in the United States and globally, which typically causes a fall-off in auto sales. But Jacobson said the company is seeing no sign of a drop in demand that might accompany an economic slowdown.
“We really aren’t seeing anything in the short-run,” he said. He said inventories were a bit higher but that wasn’t a surprise given the increased pace of production.
“We’re certainly aware of the headwinds out there,” he said. “We can’t ignore what others are saying and seeing out there. We continue to see the strong demand. The best we can do is be prepared for it.” He said the company plans no layoffs at this time, as have been announced at Ford and Tesla.
Barra said during her CNBC interview that the tighter inventories will allow the company to adjust more quickly than in past recessions if there is an economic slowdown.
Americans are borrowing at record levels to pay for their expensive cars
The company also saw a bounce back in China, where it had reported a $100 million loss from its joint ventures with Chinese automakers in the second quarter in the face of lockdowns due to surges in Covid cases there. It made $300 million in that country, matching year-prior results.
Shares of GM
(GM) rose 3% in premarket trading on the strong earnings and full-year earnings guidance of $6.50 and $7.50 a share, which gives it a solid chance to beat forecasts of $6.78 a share.