GM is 'better positioned' to weather chip shortage: Analyst

General Motors reported second quarter earnings that missed expectations. Autoblog Editor-in-Chief Greg Migliore joins Yahoo Finance Live to discuss.

Video Transcript

- For much more on the broader car space, let's bring in Greg Migliore. He is Autoblog Editor-In-Chief. And Greg, I'm just walking through the numbers on GM here.

The stock really tumbling in the session but really they are-- Some of the concerns they've highlighted speaks to the broader issues we have heard consistently throughout this earnings period from carmakers which is the rising commodity costs as well as a chip shortage. How are you looking at all those variables?

GREG MIGLIORE: Absolutely. Thanks for having me, guys. So General Motors overall did have a strong quarter and they beat estimates. There was a strong demand for some of the pickup trucks and SUVs which are obviously quite lucrative.

And that allowed them to overcome things like inventory issues and the chip shortage. General Motors like you guys mentioned did raise its earnings outlook, but the CEO Mary Barra is acknowledging some of these challenges which are really be very strong headwinds as we head into the second half of the year.

Like the Delta variant and like chip shortages, there are two very unpredictable things that could impact the business model and obviously, earnings. They have a big third quarter and fourth quarter in front of them.

Mary Barra again laid out an aggressive I think optimistic plan for growth. They're going to launch the GMC Hummer electric vehicle. This is a big deal launch for them, it's the return of the Hummer brand as an electric model and that's going to happen I believe in October.

And that's a signpost for GM. The Cadillac Lyric that's another EV is going to follow and early 2022. And they've even mentioned this morning that they want to move up $8 billion in investments to pull them ahead for EVs.

And their goal is one million sales of EVs by 2025. The challenges are really obvious though and things like the Chevy Volt recall really don't help. That was actually the last generation of bolt so it's not like the new model that's on sale right now.

But that's still is not a great situation for consumers, especially if you own one of those cars and that obviously understandably has cost them quite a bit of money in the second quarter.

So despite these challenges which recalls the chip shortage, the pandemic, they're going to weigh down basically every car company and I think GM is better positioned than most to try some new things and grow in the second half of the year here.

- Yeah, you talk about the GM, the struggles there are specific to the bolts. We're talking about hundreds million I said, on the recall issues late last month that we've been highlighting on the show here.

But that's a lot of money and you wonder if that's what's weighing here in terms of the build out and the other models you're talking about on the EV side.

If that is having investors skittish on the idea that they can actually handle as big a push into EVs, is they're kind of trumpeting here and had got investors excited about not a good look when your cars are catching on fire. How different is the technology there and a bolt versus maybe some of the other models and what GM is trying to do?

GREG MIGLIORE: Yeah, great question. So what GM is doing is basically banking on this new sort of battery cell technology called Altium. It sounds cool like a transformer type name if you will and it's I think that's good for marketing and trying to generate enthusiasm around investments.

So that's why they're going forward type of a battery packs that's going to power things like the Hummer, the Cadillac Lyric, and everything that comes after that. These bolts that are sort of in question are powered by an older type of battery cells not to get too granular here.

And they actually switched suppliers through the launch after one recall maybe. Again, that's certainly an older technology that the last generation of bulls they're trying to sort through. So I don't think that's really going to hurt them going forward.

But I mean, to your point, it's certainly not a great look especially because these are relatively new vehicles that are out there in the hands of consumers. So we'll see.

- Greg, bottom line this comes at a time when we've seen so many carmakers set for some pretty aggressive timelines for their EV rollouts. GM of course, we're looking ahead to their Hummer EV as well as the lyric being launched but you've got other carmakers.

Even somebody like a Toyota, who came out overnight had record profits but said that they were keeping their forecasts in line there because of the uncertainty around the chip shortage.

In the context of this aggressive move to try to get ahead of EV race, how significant is the shortage and is that going to pull back the timeline?

GREG MIGLIORE: I think the CEO of silence is actually a couple of weeks ago to put it very well. He did a briefing with some reporters, Carlos Tavares. And he said something to the effect that if we've never seen anything like this before.

We think it's going to keep going on and we really just don't know. Now, GM has wide ranging purchasing operation and they could get whatever they need. But with the chip stuff, we just we don't even know what we don't know.

I think it's going to drag on for at least in the next year and it's the chip shortage and the Delta variant are two things that I think weighed down GM and other automakers in a way where good quarters probably could have been a little better in normal times.

So a lot of uncertainty as we head into the fall. But again, it looks like GM is probably better positioned than many car companies to weather this and grow.

- Investors still not like what they're hearing though today as we see that stock continue to be under pressure. But Greg Migliore, Autoblog Editor-In-Chief, we appreciate you stopping by here to chat with us.