General Motors At Critical Risk Of Going Out Of Business?
Automotive icon General Motors has hit some serious business roadblocks in recent months, putting it in a risky position.
This article is more than 2 years old
General Motors is known for its innovative cars and efficient engineering. As one of the long-standing American car brands, many believe that its a company that will outlast any market fluctuations. Recently, though, General Motors took a surprising dive in its net income according to its second quarterly report. The automotive company fell 40% in net income from last year due to a combination of manufacturing and economic factors.
For anyone keeping up with the tech industry, you’d already know that computer chip shortages have been an ongoing issue. Since the pandemic’s start, chip shortages plagued manufacturing plants worldwide, with many tech companies attempting to create new facilities for chip production. Still, these shortages have affected the production of many popular electronics and devices. Car companies have also felt the weight of the computer chip shortage, creating substantial supply chain interruptions that have yet to be quelled. Computer chip and automotive part shortages decreased output for General Motors over the past two years, which has impacted the company’s net sales and income.
General Motors went down 15% in overall sales since 2021. Besides a worldwide chip shortage, a parts shortage has halted the distribution of many car orders. The automaker couldn’t deliver almost 100,000 prepared vehicles because of one or a few manufacturing parts missing. This delivery interruption has decreased General Motors’ profits and stock market value. According to their second-quarter report, shares for General Motors are selling for $1.14 each, which is less than Wall Street’s expectations of $1.27. Though the company is going through some economic turbulence, its quarterly revenue was up from analyst expectations, clocking in at $35.76 billion.
Throughout 2020 and 2021, General Motors surprisingly kept up with its profits, even with a semiconductor and computer chip deficiency. This year, the car company kept its net income at a stable rate between $9.6 billion and $11.2 billion. Despite the profit plummets, General Motors sustained a generally decent income. Mary Barra, CEO of the automotive company, stated that their team is confident that General Motors will bounce back from the concerning quarterly earnings report. Barra said in a letter to shareholders that production and “wholesale deliveries” will increase in the next quarter. Though the General Motors team wants to assure the public that there will be fewer delivery interruptions, Barra has yet to explain how the company will accomplish faster, efficient production.
One of the steps General Motors wants to take to improve its sales and revenue is to complete the unfinished vehicles it produced back in May. The car manufacturing, which was halted by missing parts, will hopefully finish semi-completed vehicles by the end of 2022. The company stated that dealers would have these completed cars by the next quarter, which will likely bump up their sales and net income.
Most automotive giants in this current climate have not been treated well by the market’s precariousness. With continued supply chain interruptions and vehicle demand rising, car companies are often stuck in a manufacturing limbo. Hopefully, as more companies attempt to solve production delays, overall revenue and stock market value will increase again.
