General Motors has warned that it may cut car production further in Europe as a result of Britain’s vote to leave the European Union, as uncertainty caused by the vote dampens demand for new vehicles.
The Detroit-based carmaker vowed to “take whatever action is necessary” to offset the impact of the Brexit ballot, which has already cost it $100m in the past three months due to currency shifts, taking the shine off a record quarter that saw its net income more than double.
General Motors is struggling to turn a profit in Europe, hampered by fierce competition and tight margins, in contrast with the US where demand for large SUVs and trucks has driven profitability.
The fall in sterling and softening vehicle demand will cost the company $300m in the final three months of the year, GM warned on Tuesday.
Chuck Stevens, chief financial officer, said GM had been on track to make a profit in Europe before the vote, and may now cut production to stem losses.
“We are prepared to take whatever action is necessary to put Europe back on the path,” he said.
The UK, where it trades under the Vauxhall brand, is GM’s largest market in Europe. GM uses the Opel brand across the rest of the continent.
It raised prices by 2.5 per cent in the UK in October to offset the impact from weaker sterling but Mr Stevens warned that across its European operations “break-even for the year is clearly at risk”.
In an interview with the Financial Times, he said there is a “a lot of uncertainty on how [the impact of the Brexit vote] will play out over time”, but added that UK sales had “held up pretty well” since the vote.
The company already cut back output at two of its European plants that produce cars popular in the UK market.
In August the group shortened working hours at sites in Germany producing the Corsa hatchback and Insignia saloon cars for the rest of the year.
Vauxhall’s UK plant at Ellesmere Port, which makes the Astra hatchback, is heavily reliant on EU sales, because around 80 per cent of the 120,000 cars produced at the site are exported to other member states.
It produced 259,000 cars in Germany, and also has manufacturing sites in Poland, Hungary, Austria and Spain.
Mr Stevens insisted it was “too early to say anything specific about capacity reductions” in the UK or mainland Europe.
The company is due to make a decision in the coming months whether to produce the next generation of the Astra in the UK or in Europe, but Mr Stevens refused to be drawn on the details of the talks.
Strong truck sales in the US market, which has hit a peak after seven years of growth, helped GM post net income attributable to shareholders of $2.77bn for the quarter to September 30, up from $1.36bn a year ago.
General Motors, which has largely been more bullish on the US market than some other US-based automakers, acknowledged that the home market had levelled out but called the current sales environment “strong but plateaued”.
Michelle Krebs of Autotrader.com said: “General Motors posted another strong quarter, beating analysts’ predictions on nearly every metric, including earnings and revenue. GM’s performance comes from the North American market, which is showing signs of plateauing. While GM paints a rosy forecast for its expected results for the year, it will have to accomplish those in a much tougher, even more competitive market.”
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