Opel still in the red as GM profit hit by weak pound post-Brexit

February 09, 2017

Despite aiming to be in the black in 2016 for the first time this century, General Motors European Opel brand posted an operating loss of $257m (€243m), which it blamed on the weaker pound following the Brexit vote. 

Opel chief executive officer Karl-Thomas Neumann said: ‘Without the Brexit vote and the crash of the British pound, we would have had a positive yearly result.’ 

However, Exane BNP Paribas analyst Stuart Pearson told the Financial Times that while foreign exchange was partly to blame, ‘the business would have been loss-making in the region’ even excluding currency movements. 

After a tough makeover of Opel and its British counterpart Vauxhall, General Motors had hoped in 2016 its European arm would achieve its first yearly profit since 1999. 

Opel lost €230 million in the fourth quarter of 2016 (compared to €257 million for the year), which it says is its best fourth quarter and annual results in ten years - up from €813m (€769m) the year before. General Motors Chief Financial Officer Chuck Stevens now expects the European division to at least break even in 2018. He added: ‘We expect flattish performance in Europe in 2017 vs 2016.’ 

General Motors cut production of two cars made by Opel after the UK’s vote to leave the EU. 

Globally, General Motors' fourth quarter revenues hit $43.9 billion (€41 billion), up 10.8% year on year. New launches of sport utility vehicles continued to be the bulwark of the OEM’s North America profitability, as it launches new SUVs into segments that are growing. 

Regarding President Trump’s threat to impose a ‘big border tax’ on vehicles or parts manufactured in Mexico, Stevens said General Motors was ‘better positioned than the industry on average,’ because it has a lower proportion of imported content in its cars sold in the US. 

Meanwhile, Volvo announced a double-digit improvement to its 2016 earnings, as operating profit rose 66% to 11.0 Swedish crowns (€1.2 billion) and revenue surged 10% to 180.7 billion crowns (€20.2 billion). Volvo benefitted greatly from the new Volvo XC90 launched two years ago, with SUVs now accounting for 52% of Volvo’s global sales.

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