General Motors expects to boost global volumes by 25% to 30% this year as it bulks up production of smaller, more affordable crossovers and sedans that could not be built previously due to missing chips. 

Despite consensus among analysts that the semiconductor pipeline remains fragile, executives from the Detroit manufacturer say the crisis appears to be over. Supply remains constrained, yet it continues to steadily improve since the third quarter.

“The run rate that we’ve seen sequentially from 3Q to 4Q to 1Q is giving a heightened level of confidence,” finance chief Paul Jacobson told investors during an earnings call on Tuesday. “We expect ongoing semiconductor availability improvements throughout 2022.”

He added that a better supply of microchips during the fourth quarter allowed the company to complete and sell over 80,000 vehicles from its inventory of semi-built vehicles lacking parts. 

A third of inflation

Since the company is predicting only a modest volume gain in China, production rates in the U.S. are expected to be disproportionately higher than the overall global number, GM executives confirmed. 

The automaker is targeting around 800,000 cars built quarterly for North America starting July, returning to levels seen before the shortage became especially acute.   

The company had been hit hard in the third quarter of last year by COVID lockdowns in Malaysia, home to labor-intensive downstream chip packaging facilities. This ultimately caused GM to lose the crown as the largest U.S. automaker by sales to Toyota.

“Remember that in 2021 we largely protected our high-demand truck production. As a result, the incremental volume in 2022 will be mostly weighted toward small and midsize SUVs and sedans,” said Jacobson.

This increase in supply, particularly of more affordable models, bodes well for U.S. consumers. The chips crisis accounted for a third of consumer price inflation, according to Commerce Secretary Gina Raimondo.

When asked about the source of GM’s confidence to forecast annual volumes rising more than a quarter at this early juncture, CEO Mary Barra cited months of working closely with semiconductor manufacturers. 

New links emerging

Prior to the shortage, the process of a building a car was like a pyramid with a strict pecking order. A thousand suppliers started out feeding parts to hundreds of peers higher up the chain. These in turn were built into components shipped to dozens of suppliers and so on, up the line, until finally a small handful called Tier 1s delivered whole modules like cockpits directly to car companies. 

The crisis, however, forced GM to conduct a thorough analysis of its parts chain in order to gain a level of visibility it otherwise lacked. 

“We said last year we’re going to work deep into the tiered base and understand the capabilities,” Barra explained. “Based on everything we know today, based on the commitments of the supply base, this is what we think we will be able to do.” 

Most automakers don’t maintain direct business dealings with the chip industry. 

Only recently have they begun to select directly from an elite number of semiconductor designers like Nvidia, AMD, and Qualcomm. Even then it is mainly for expensive high-performance processors that might run a car’s infotainment display or steer the vehicle, not the bulk commodity circuits costing a dollar that have been at the heart of the shortage.

On Tuesday, GM posted a record underlying profit of $14.3 billion for 2021 and forecast earnings this year between $13 billion to $15 billion as it ramps up investments in a bid to shift away from combustion engine cars toward future areas of growth. 

“We see a path to doubling revenue by 2030 while expanding margins, with significant opportunities in software, services, and new businesses in electric and autonomous vehicles,” CFO Jacobson said.

The bad news for investors? GM boss Barra said she would not at this point reinstate a quarterly dividend on the automaker’s common stock, suspended since the pandemic erupted, in order to conserve financial firepower for the transformation.