GM CFO: 'We're exercising a lot of caution about the future'

Dive Brief:

Despite chip shortages and growing consumer interest in electric vehicles (EVs) over motor vehicles, demand for GM vehicles remains very strong, CFO Paul Jacobson said Thursday following the company’s second quarter earnings report.
Detroit, Mich.-based GM reported a $34.2 billion net revenue this quarter, more than double its revenue this time last year. “While raw materials continue to be a significant year-over-year headwind as platinum group metals and steel prices have continued to increase this year, we have been mitigating the impact by managing several other factors, including pricing and mix, go-to-market strategies, record profits at GM financial and other cost efficiencies,” Jacobson told analysts Thursday.
GM boosted its full-year pretax profit forecast to between $11.5 billion and $13.5 billion, which fell short of analysts’ forecasts, which Jacobson said is a show of the company “exercising a lot of caution in the future.” The company “has always been focused on making sure we're putting numbers out that we know we can deliver on,” he said.

Dive Insight:

GM, like many other motor and tech companies including Tesla and Ford, has been struggling to maintain supply amid a chip and semiconductor shortage stemming from factory closures in Malaysia.

Lower inventories and strong demand has hiked up prices at GM, Jacobson told Yahoo Finance Thursday. “And that's what we've got to keep an eye on. But when you look at the trim levels and the mix of the vehicles we've been producing, customers are showing a clear desire to have some of those higher-end trim models, which is great for us, because we're particularly good at delivering style and value to the customers. So we're very optimistic about the quality of the vehicles and what customers are going to ultimately opt to buy.”

Jacobson said the company has devised numerous workarounds to try and mitigate the shortages’ impact. “We've launched digital tools to help give dealers visibility up into the stream so they can see the vehicles that are coming and proactively contact customers,” he said. “A lot of these lessons will apply to the future.”

GM “certainly” needs more inventory than it currently has, Jacobson added, saying many dealerships are grappling with empty lots. “Vehicles, in a lot of cases, are selling as soon as they're coming off the truck at delivery, which is great, but for the fact we need to have vehicles on the lots for customers who drive in and want to drive off with a new vehicle.”

Despite the setbacks and the consistent threat of inflation, Jacobson told Yahoo, GM believes it will reach a 10% operating margin in North America in 2022. “Our North American profitability also includes a lot of R&D expenses for electric vehicles and other growth areas,” he said. “The business is performing well and allowing us to fund, and even accelerate, our journey towards electric vehicles and autonomous vehicles.”

The customers, not the automakers, will ultimately determine the pace and popularity of EV adoption, he said, and GM intends to be leaders in the EV space. “We believe we can have a leading North American market share in this space over the decade,” he said. “We’re in the process of launching over 30 electric vehicles that we'll be producing by 2025. I think we're going to be uniquely positioned to meet demand in all sectors of the economy."