How Did GM’s South American and European Operations Fare in 2Q15?
What's Next for General Motors after Its 2Q15 Earnings Beat?
GM’s South American operations
Previously, we explored the 2Q15 financial performance of GM’s Chinese operations. Now we’ll see how GM’s South American and European operations fared in 2Q15.
General Motors’ South American operations posted a negative adjusted EBIT (earnings before interest and taxes) of $0.1 billion in 2Q15. This is similar to what the company posted in 2Q14. Ford Motors’ (F) South American operations were also negatively impacted in 2Q15. Vehicle sales in Brazil (EWZ), the largest market in South America, have slowed down.
European operations
The above chart shows the 2Q15 financial performance of GM’s European (VGK) operations. GM managed to achieve a near break-even on an adjusted EBIT level. This compares to a negative EBIT of $0.3 billion in 2Q14.
However, GM’s market share in Europe came down in 2Q15, largely due to the withdrawal of the Chevrolet brand and GM’s exit from the Russian market.
European outlook
The European automobile industry continues to improve, and vehicle sales have now increased on a yearly basis for 22 consecutive months. The ACEA (European Automobile Manufacturers’ Association) has also revised its annual sales growth estimates upward for 2015 to 5%. Earlier, the ACEA estimated sales to grow by 2% this year.
However, there’s significant production overcapacity in Europe. Yearly vehicle sales numbers are still below their pre-crisis highs, unlike the United States where vehicle sales are set to hit a decade high this year. Honda Motor Company (HMC), which gets a large percentage of its revenues from the United States, benefits from rising US vehicle sales.
GM expects its European earnings in the second half of 2015 to be negatively impacted by product-related costs. Also, vehicle sales typically move more slowly in Europe in the third quarter due to a seasonal summer slowdown.
You can track recent developments in this industry by visiting Market Realist’s Autos page.
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