General Motors’ European operations wowed analysts and the industry alike upon reporting break-even financial results for the first quarter of 2016. The unit has lost money for so many consecutive quarters that it has become the status quo.
Primarily the result of an aggressive product rollout and various cost-cutting initiatives that have been years in the making, the GM Europe turnaround appears to indeed be well along the way. The automaker now expects its European operations to break even for the entire calendar year 2016 — which is also a rather significant improvement over the $800 million loss the unit incurred in 2015 — on its way to potential profitability thereafter. But a new development in the region may jeopardize that progress.
During the recent Q1 2016 earnings call with analysts and the media, General Motors CFO Chuck Stevens noted that the threat of the United Kingdom leaving the European Union represents a new headwind in the region since it weakens the British pound, thereby negatively affecting GM’s exchange rates.
“That’s the biggest risk that we have, amongst many, that we are working to manage through,” Stevens said.
General Motors operates in the U.K. through the Vauxhall brand, itself a subsidiary of GM’s Adam Opel AG. The U.K votes in June on whether or not to remain a member of the 28-country bloc.