Despite revenue growth of 4.7% in the second quarter, General Motors reported a year-over-year drop in net profit of nearly 40% on Tuesday and said to expect better performance in the second half.
GM’s net profit fell to $1.7 billion as the maker battled a global chip shortage. GM was hardest hit by the shortage in June. To increase revenue and reduce costs, GM is slowing hiring and limiting spending.
According to a statement from GM, adjusted earnings before interest and taxes fell 43% to $2.3 billion, while revenue rose to $35.8 billion.
Chairman and CEO Mary Barra said recently that GM was making significant changes to boost cash flow, including hiring efforts. Despite declining net revenues, GM still expects to meet its year-end targets.
Chief Financial Officer Paul Jacobson said on a conference call: “We’ve slowed down some hiring (and) we’ve deferred some costs and expenses that we were going to incur this year to try to balance that with the pressure we’ve seen both inflation as well as some of the other supply chain challenges.GM has also responded to inflation and supply shortages by raising the price of its vehicles by an average of $6,600.
As outbreaks of COVID-19, and more recently Russia’s invasion of Ukraine, have forced production shutdowns and caused chaos with logistics around the world, GM has faced disruptions of the supply chain in recent quarters.
These setbacks were felt by GM’s US dealers, whose inventory levels are still low. Over the past year, including the second quarter, dealers only have 10 to 15 days of inventory, the company reported Tuesday. This is significantly less than the usual 60-90 days.