General Motors said Tuesday it’s moving to take more control over its supply chain in response to a dismal second quarter that saw profits fall 40% year-over-year as it shifts more towards EVs.
The automaker reported second-quarter net income of $1.69 billion, a 40% reduction from the $2.84 billion it earned in the same year-ago period. GM blamed its weak performance on a drop in North American production due to supply chain disruptions and semiconductor chip shortages that caused bottlenecks at its factories.
GM reported $35.76 billion in second-quarter revenue, beating the $34.6 billion the analysts expected, but fell short of profit forecasts, reporting $1.14 per share versus $1.30.
Despite the supply chain pains, GM still affirmed its full-year guidance of between $9.6 billion and $11.2 billion in net income as it ramps up its EV production, including bringing new factories online. On an adjusted EBIT basis, GM is forecasting $13 billion and $15 billion for the year.
GM won’t reach that target if its supply chain problems persist, a point GM Chairman and CEO Mary Barra reiterated throughout the company’s second-quarter earnings call with analysts.
“Our number one goal right now is to get these battery plants up and get launched because there is such strong demand for the products,” Barra said, emphasizing that raw materials and localizing battery production will be two areas of focus.
Barra said the automaker signed a trio of binding agreements with suppliers to secure enough raw materials to make enough batteries to power its EVs. That includes partnerships with LG Chem for nearly a million tons of cathode material between now and 2030 and lithium-supplier Livent.
“What this means is GM now has binding agreement securing all battery raw materials supporting our goal of a million units in new capacity in North America in 2025,” Barra said.
GM is investing $7 billion with LG Energy to build four lithium-ion battery cell manufacturing plants through its Ultium Cells joint venture. Barra said the first factory is on track to open in Lordstown, Ohio, in August, followed by plants in Michigan, Tennessee, and an undisclosed fourth location. Ultium Cells received a $2.5 billion loan from the U.S. Department of Energy Monday to support the project.
“Our strategy is to control our own destiny,” Barra said. “Securing cells from this plant are key to significantly ramping up production of the GMC Hummer EV and the Cadillac Lyriq to meet pent-up demand.”