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TL;DR

Basically, GM pre-chip shortage:

89849


GM, post chip-shortage:

89851


Everybody wins!?!

(Reuters) -General Motors Co and Chief Executive Mary Barra were forced by the semiconductor supply-chain crunch to slash production and sell fewer vehicles at higher prices.

The result: Fatter margins, far stronger than expected first-quarter profit and a healthy boost for GM shares.

Executives at Stellantis NV, created by the merger of PSA and Fiat Chrysler, echoed the same theme on Wednesday. Last week officials at Daimler AG and Ford Motor Co made similar comments.

Through the haze of production cuts and supply-chain snafus, some automakers are discovering they can deliver better results without stockpiling vehicles or padding sales volumes with low-priced, low-margin models.

"We'll never go back to that level of inventories that we held pre-pandemic because we've learned we can be much more efficient," Barra told analysts on a conference call on Wednesday, though she added future supplies would be "a little higher" than current levels to satisfy customer demand.

"It's better for everybody," she said. "It's better for the car company, it's better for the dealer."

Barra added the No. 1 U.S. automaker was focused on maximizing production of high-demand vehicles like the full-sized Chevrolet Silverado pickup, and GMC Yukon, Chevy Suburban and Cadillac Escalade SUVs.

The leaner vehicle supplies allowed GM to raise average new-vehicle transaction price by 9% overall, including 10% for pickups and over 20% for large SUVs
, Chief Financial Officer Paul Jacobson said.

Thanks to high consumer demand that has pushed up prices, focusing on those high-margin models contributed $3.2 billion to GM's first-quarter pretax profit.

Pretax margins in GM's North American auto business hit 12.1% in the first quarter, up from 8.5% a year earlier.

GM has continued to build its highest-profit vehicles by shifting supplies of chips from lower-priced models and idling factories that produce them. Last week, it extended downtime for plants in Kansas and Ontario into early July and late June, respectively, curtailing output of the Cadillac XT4 and Chevy Equinox SUVs, and the Chevy Malibu sedan.

Ford on Wednesday outlined plans to idle more plants, including two weeks in May at its Kansas City, Missouri, plant that builds the top-selling F-150 truck.

Auto executives, especially at the Detroit Three, have talked for years about more closely matching production and inventories to customer demand, moving away from endless rounds of discounts and year-end clearance sales. The pressure to keep factories running, and a tradition of aiming for higher sales volumes, kept the prize out of reach.
At Daimler, Chief Financial Officer Harald Wilhelm on April 23 highlighted the company's higher margins and praised the industry for "not dumping" vehicles into the market.
"We are not pushing like mad for volumes, and that has a healthy impact," Wilhelm said.
The current chip supply crisis is far from the ideal way for automakers to achieve a more profitable balance of supply and demand. Automakers have cut full-year profit forecasts, and are warning the squeeze could last into next year.

Barra echoed other auto executives when she said the chip shortage will worsen in the second quarter before improving in the second half of the year.
GM reiterated its full-year 2021 earnings guidance and said "based on what we know today," its results will be at the upper end of the $10 billion to $11 billion adjusted pretax profit it has previously forecast.

GM stuck to earlier forecasts that the chip shortage could shave $1.5 billion to $2 billion from this year's profit. The automaker declined to say how much vehicle production would be lost this year due to the issue.

Carmakers across the world have had to curb output, hampering their attempts to recover from the COVID-19 pandemic, due to a shortage of vital chips used in everything from computer management of engines to driver assistance systems. Stellantis, echoing GM as well as Ford last week, said second-quarter production would suffer and the chip shortage would linger into 2022.

Barra also said on Wednesday GM was working with Honda Motor Co to expand their partnership to purchasing, research and development, and connected services.

GM posted a first-quarter net profit of $3 billion, or $2.03 per share, up from $294 million or 17 cents per share, a year earlier. Excluding items, it earned $2.25 per share, well above analyst expectations of $1.04.

The company's shares were up 3.8% at $57.45 on Wednesday afternoon.
MSN
 

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I'm no business dude so it amazes me that it took GM like 100 years to figure this out. Only build what you can sell essentially on your terms. If you have cars that need 5-6 months to sell.... stop building em
 
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I'm no business dude so it amazes me that it took GM like 100 years to figure this out. Only build what you can sell essentially on your terms. If you have cars that need 5-6 months to sell.... stop building em
Part of the old GM's problems is the union contracts which prevented them from shutting down lines even if they were oversupplying. They had contracts (pre bankruptcy) where they had to keep people working X number of hours in Y plant. It was very inflexible.They have more flexible labor contracts in the new post-bankruptcy company.
 

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I'm no business dude so it amazes me that it took GM like 100 years to figure this out. Only build what you can sell essentially on your terms. If you have cars that need 5-6 months to sell.... stop building em
Much better for brand integrity as well.

As mentioned earlier the UAW is basically the anchor around domestic automaker’s necks. (The British car industry was wiped out by labor unions.)

This chip shortage was a good way for them to reduce production without breaking contracts.
 

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The UAW needs to change. I dont blame GM whatsoever for profiting. This reduction in production clearly shows how the unions stifles the domestics.
 

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The UAW needs to change. I dont blame GM whatsoever for profiting. This reduction in production clearly shows how the unions stifles the domestics.
I'm no fan of the UAW, but many other manufacturers are able to produce cars profitably in countries with much stronger unions. Certainly the UAW isn't a "booster" to GM's profitability, but it's way too easy to just point at the UAW as the sole culprit.

Let's see how this plays out 12-24 months down the road as dealer inventories are emptied out (which has pretty much already occurred), manufacturers struggle to get their lines up and running at full capacity alongside the chip shortage, and the delayed demand for new cars and extra pocket money from Covid wears off.
 

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We've all been saying this for decades... if you have to put $10k on the hood of every truck/car you sell, it's either priced wrong, or you are making way too many. At some point, something has to give.

If the current chip/demand/production climate finally allows these manufacturers to right-size their production, then they should absolutely take advantage of that.

But I'm one of those weirdos who think cars should be sold for the same price to everyone. Not a selling price that swings wildly from one customer to the next based on how much they know or how easily fleeced they are.
 

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It is more like the market trend finally favor to GM (and the other big 2). To me, the Big 3 were always suck at making (designing) cars but great at pickup and SUV. (specially for the last 3 decades)
 

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I really wish US automakers would see the history of the British Auto companies and realize that organized labor is an outdated poison.

also, I know people think it's funny, but he actually said "Big League" not "Bigly"....

Link: Big-League, not Bigly
 
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