General Motors reported very healthy earnings for the 2016 calendar year, consisting of a net income of $9.4 billion (down 2.7 percent), earnings per share (EPS) diluted of $6.00 (up 1.5 percent), and earnings before interest and tax adjusted (EBIT-adjusted) of $12.5 billion ($15.9%) on net revenue of $166.4 billion (up 9.2 percent). During that time frame, the automaker’s European division, otherwise known as GME or Opel-Vauxhall, posted a $257 million loss, the division’s sixteenth year of not posting a profit.
Though GM Europe’s results represent a notable improvement over the $813 million loss in 2015, it apparently wasn’t enough, as GM elected to sell the Opel-Vauxhall unit that comprise GM Europe to French automaker PSA Group.
|Metric||2016 CY||2015 CY|
|Net Revenue||$18.7 billion||$18.7 billion|
|Net Income||-$257 million||-$813 million|
|Sales Volume||1,162,000 units||1,127,000 units|
GM Europe’s net income of negative of $257 million was an improvement of $556 million from a negative $813 million in 2015, demonstrating that Europe has made substantial progress towards its plan to break-even by taking advantage of a recovering industry, cost optimization and the benefits of the Astra launch, resulting in Y-O-Y improvement in results. However, despite the improvements experienced through most of 2016, the unit was unable to overcome the impacts of the U.K. referendum vote to leave the European Union (Brexit), resulting in a $0.3 billion unfavorable impact due primarily to adverse movement in the British Pound against the U.S. Dollar.
GM anticipates that the impacts of Brexit will continue through 2017 as well as headwinds associated with industry pricing pressures and increased costs associated with depreciation, amortization, marketing and costs associated with GM Europe’s new product launches. The automaker intends to mitigate these headwinds with the full-year benefit of the recently-launched Astra and Mokka X along with the 2017 launches of the Insignia, Ampera E, and two new crossovers — the Crossland X and Grandland X — that GM believes will substantially increase its competitiveness in the market.
GME had the following KPIs during the year:
- Volume: total volume was flat while products such as the Opel Astra continue to be very well-received in their local markets.
- Mix: unfavorable primarily due to country and channel mix as a result of Brexit.
- Cost: favorable year-over-year due to carryover material performance and fixed cost.
improvement, partially offset by incremental material cost on majors.
- Other: unfavorable due to weakening of the British Pound.
Given the sale of Opel-Vauxhall to PSA, we expect this to be the last earnings report for GM Europe, at least the GM Europe that encompasses Opel-Vauxhall. Perhaps GM will return to Europe with its Chevrolet brand.