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GM improves earnings outlook as supply chain problems ease

The new GM logo is seen on the facade of the General Motors headquarters in Detroit, Michigan, March 16, 2021. REUTERS/Rebecca Cook

DETROIT, Dec. 1 (Reuters) – General Motors Co (GM.N) expects adjusted pre-tax profit for the full year to reach around $ 14 billion, more than previous forecast, has the automaker’s chief financial officer, Paul Jacobson, said during a presentation.

GM previously forecast adjusted full-year pre-tax profits of $ 11.5 billion to $ 13.5 billion. GM shares rose more than 2.5% by mid-afternoon after Jacobson’s statement.

GM’s financial performance is benefiting from strong consumer demand, high prices for new vehicles and more stable semiconductor supplies, Jacobson said.

However, GM vehicle production and inventory will not return to normal until the end of 2022, Jacobson warned.

Tight stocks support higher prices, but GM and its rivals still struggle to strike a balance between stocking too many vehicles, as in the past, and too few for a U.S. market where many consumers still buy what is on a dealership lot.

GM is also grappling with rising costs for the commodities used in its vehicles.

“We see inflation everywhere,” Jacobson said.

So far, Jacobson said the company isn’t seeing much of an impact from the new variant of the Omicron coronavirus.

“We are continuing the protocols that we put in place that have worked,” said Jacobson.

In an online interview with Credit Suisse auto industry analyst Dan Levy, Jacobson said GM would aggressively invest in electric vehicles and other tech as it tries to catch up with the market leader. Tesla Inc. electric vehicle market (TSLA.O) and compete with competitors such as Volkswagen AG and Ford Motor Co (FN).

“We pulled about 12 EVs from the original plans a year and a half ago,” he said.

Jacobson has said he would rather see GM build a battery plant that sits idle for two or three years rather than being caught off guard without sufficient battery capacity. Jacobson said he had told other GM executives he would support spending to speed up electric vehicle programs or invest in promising technology.

“There is money in the account and the checkbook is open,” Jacobson said. “You have to put on the memo line what you’re going to use it for.”

This contrasts sharply with the austerity imposed by GM in early 2020 when the pandemic forced North American production to an almost total halt.

Despite a strong recovery from the pandemic shock and aggressive plans to double revenues by 2030, GM’s $ 84 billion market value remains a fraction of Tesla’s $ 1,000 billion value and also follows the automaker Newly public and much smaller Rivian electric trucks and vans (RIVN .O).

“We have clear advantages over startups,” said Jacobson. “Not all startups are Tesla.”

Our Standards: Thomson Reuters Trust Principles.

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