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General Motors (GM) stock rose after possibility of reduction in worldwide semiconductor shortage

General Motors (GM) stock rose on Friday after the automaker said it expected to be compensated for its billion-dollar battery recall and predicted a reduction in the worldwide semiconductor supply shortage.

Image: General Motors

Chief financial officer Paul Jacobson said Friday at RBC’s Global Industrials Conference that GM anticipates a “more stable year” for semiconductor supply in 2022, just days after prolonging shutdowns in assembly factories in Ohio and Missouri.

Jacobson also stated that he expected the carmaker to recoup the projected $1 billion cost of the Chevy Bolt battery recall from LG Chem Ltd, a Korean company. Last month, the recall was expanded to encompass all global sales of the electric vehicle since 2019 in order to remedy two manufacturing problems in the car’s battery cell, including a broken anode tab and a folded separator, which might raise the danger of fire.

In early Friday trade, General Motors shares rose 3% to $49.88 per share.

Toyota Motor Co. (TM), the world’s largest automaker, reduced its output projections for 2022 due to what it called the “twin headwinds” of growing coronavirus infections in Asia and a global semiconductor scarcity.

Toyota announced that it will build about 9 million vehicles this year, down from a previous projection of 9.3 million, as COVID-related shutdowns in assembly hubs in Vietnam and Malaysia added to previous concerns about a scarcity of car-specific semiconductors.

The decision comes after a slew of shutdowns and supply-chain warnings from automakers in the United States and Europe, while August sales in China, the world’s largest automobile market, fell 17.8% year over year as a result of the chip shortage, which left fewer vehicles available for delivery.

Low inventory levels of automobiles and trucks combined with strong customer demand have resulted in new and used vehicle pricing records, resulting in higher profit margins for automakers like GM and their financial firms.

The potential 200,000-vehicle effect comes after GM announced or extended downtime for almost all of its North American factories for various durations of time last week. Even if the semiconductor supply chain isn’t “back to totally unfettered” levels, Jacobson expects 2022 to be a “more stable year.”

Due to the turbulence of the situation, automakers, including GM, have refrained from issuing fresh estimates for how much the chip shortage will affect profitability. They had previously predicted billions of dollars in losses as a result of the issue, most of which has been offset by greater profits owing to record vehicle prices.

According to a May prediction by consulting company AlixPartners, the worldwide semiconductor chip shortfall would lose the car sector $110 billion in revenue in 2021.

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