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GM 2020 profit drops, but it makes $6.43B despite pandemic

FILE - In this April 23, 2018, file photo, the logo for General Motors appears above a trading post on the floor of the New York Stock Exchange. General Motors net profit fell 4.5% in 2020, but a strong second half more than offset the effects of pandemic-related factory closures and a costly air bag recall. The Detroit automaker said Wednesday, Feb. 10, 2021 it made $6.43 billion as demand for its vehicles surged late in a year dominated by coronavirus upheaval. (AP Photo/Richard Drew, File) (Copyright 2018 The Associated Press. All rights reserved.)

DETROIT – General Motors' profit fell 4.5% in 2020, but a strong second half more than offset the effects of pandemic-related factory closures and a costly air bag recall.

The Detroit automaker said Wednesday it made $6.43 billion as demand for its vehicles surged late in a year dominated by coronavirus upheaval. In the fourth quarter, the company made $2.85 billion.

After GM’s North American factories reopened in May, the company ran many of them flat-out but couldn’t make up all the lost production. As customers returned to buying again, inventory was short and GM’s U.S. sales for the year fell 12% from 2019. But because buyers bought more expensive trucks and SUVs and loaded them with options, the company was able to turn a big profit.

Even with the strong performance, GM shares fell 4.4% in midday trading, largely because of cautious company guidance about a semiconductor chip shortage that's affecting the whole auto industry. GM predicted the shortage will cost it $1.5 billion to $2 billion in earnings before taxes this year due to lost production. Still, GM expects pretax income for the year of $10 billion to $11 billion, or $4.50 to $5.25 per share.

The shortage has forced GM to cancel shifts at several factories, but CEO Mary Barra said it won't affect GM's most profitable vehicles that are in high demand. She expects the chip shortage, which is hitting the entire auto industry, to be resolved this year, but it was too early to predict precisely. “We're doing everything possible,” Barra said. “We won't lose any production throughout the year as it relates to full-size trucks and SUVs.”

GM could build vehicles without chips and install them when the parts become available, she said.

CFRA Analyst Garrett Nelson, who has a “hold” rating on GM stock, wrote in a note to investors about the near-term risk of the chip shortage. He also sees “significant operational and profitability related risks” from the company’s planned transition to all-electric light vehicles in the coming years. GM has set a goal of making all light vehicles it sells run on batteries by 2035.

On Wednesday, the company released more details about its aggressive push into electric vehicles.

GM already has pledged to spend $27 billion developing 30 new global electric vehicles and on autonomous vehicle research by 2025, with two-thirds of the EVs coming to the U.S. The plans to spend more than $7 billion on electric and self-driving vehicles in 2021 alone. Of that, $6 billion would go to electric vehicles and $1 billion would go to autonomous, Chief Financial Officer Paul Jacobson said.

In North America, GM’s primary profit center, the company made just over $9 billion before taxes last year. That means about 44,000 members of the United Auto Workers union will get profit sharing checks of around $9,000 later this month.

Barra wouldn't give a specific time frame for its Cruise autonomous vehicle unit to start a ride-hailing service without human backup drivers. But she said it's not “years away” like many people think. The company is now testing vehicles without human backups in San Francisco.

She also said people will hear more from GM later this year about restoring the company's dividend, which was cut last year to help deal with the pandemic.

Excluding one-time items, GM earned $4.90 per share in 2021, beating Wall Street estimates of $4.40. Revenue for the year was $122.49 billion, which also passed estimates of $120.83 billion, according to FactSet.

For the fourth quarter, the company earned $1.93 per share, also ahead of analyst expectations of $1.60. Revenue was $37.52 billion, surpassing estimates of $36.18 billion.

The fourth-quarter and full-year results took a $1.1 billion hit from a gigantic recall involving 7 million big pickup trucks and SUVs worldwide with potentially dangerous air bag inflators made by Takata.