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AUTO ROUNDUP: GM Finally Profits in Europe; Volvo's SUV Delivers

July 21, 2016
But GM executives warned that uncertainty created by the British vote to exit the European Union could push the region back into the red in the second half of the year.

General Motors lifted its 2016 profit forecast Thursday following strong second-quarter earnings as it again reaped rewards from booming sales of trucks and sport utility vehicles in its home market.

The better-than-expected results included the US auto giant's first quarterly operating profit in Europe in five years.

But executives warned that uncertainty created by the British vote to exit the European Union could push the region back into the red in the second half of the year.

Net income for the quarter ending June 30 more than doubled to $2.9 billion from $1.1 billion in the year-ago period. The 2015 results were dented by one-time charges. 

Revenues jumped 11% to $42.4 billion, much of that driven by a strong performance in North America due to robust sales of large vehicles and gains from several high-profile launches, such as the Chevrolet Malibu sedan and the Cadillac XT5 SUV. 

Vehicle launches typically command higher prices than older models. Those higher prices helped GM notch a North American operating profit 31.2% above a year ago, even though the automaker sold fewer vehicles in the region. 

North American sales have been boosted by cheap gasoline and easy access to credit, although most analysts expect the pace of growth to moderate in 2016 compared with the last few years.

GM chief financial officer Chuck Stevens said the auto maker's forecast holds that strong US sales will continue in the second half of 2016 and into 2017 due to improving economic conditions.

"North America had a great first half of 2016," he told analysts on a conference call. "We expect North America to have a great second half."

Operating profits in Europe were $137 million, up from a $45 million loss a year ago, keeping pace with the company's pledge for break-even results in the slumping region for the year.

However, GM said the big drop in the British pound and economic uncertainty in that country after the Brexit vote has put strain on Britain's auto industry, potentially leading to a negative hit of $400 million in the second half of the year.

Stevens said there were still a lot of unknowns about Britain and Europe after the Brexit vote, but that British auto sales could fall by five to 10%. GM could respond by reining in costs, or reducing the company's footprint in the region, he said.

"This is another speed bump along the way, but we're just going to have to deal with it," Stevens said.

GM pointed to strong sales in China, but reported another operating loss in South America. Executives cited Brazil as an especially weak market in the region.

In light of the better-than-expected quarter, GM now expects 2016 earnings of $5.50 to $6.00 a share, up by 25 cents from the previous range. Earnings in 2015 were $5.02 a share.

Shares of GM rose 2.2% in late-morning trade to $32.17.

Volvo Confident of Setting Sales Record

Volvo Cars, owned by China's Geely, said Thursday it was on track to sell a record number of cars this year thanks to the success of its new high-end SUV.

The Swedish carmaker said in its second-quarter earnings statement that strong sales were accompanied by improving margins despite investments tied to launching its new top-of-the-line models.

Sales rose by 11% compared to the April through June period last year to 83.6 billion kronor, (8.8 billion euros, $9.7 billion), while operating profits tripled to 5.6 billion kronor for a margin of 6.7 percent.

Volvo Cars sold 256,563 vehicles in the first half of the year.

"This robust first half year of financial and operational performance combined with a positive product pipeline allows me to state confidently that we expect to report another record year in 2016 in terms of sales..." said Chief Executive Hakan Samuelsson in a statement.

The company, which Geely bought from Ford in 2011, for the first time surpassed the 500,000 vehicles mark last year.

Volvo Cars, which makes no secret of its ambition to compete head-on with leading global high-end brands Audi, BMW, Mercedes-Benz and Jaguar, said sales of its redesigned luxury XC90 SUV surpassed expectations at nearly 44,000 in the first half of this year.

The model was its top in the US market, where sales jumped 25%. Sales in Europe, Volvo Cars's top region, rose by 10.3%, slightly higher than the 9.4% registered in the market overall.  

Sales rose by 6.3% in China.

Daimler Drives to Record Sales

German top-of-the-range carmaker Daimler said Thursday that it sold a record number of vehicles worldwide in the second quarter, driven largely by strong demand for its flagship Mercedes-Benz brand.

Daimler said in a statement that it sold 761,3340 cars and commercial vehicles in the period from April to June, an increase of seven percent over the year-earlier period.

That strong performance pushed second-quarter revenues up by 3% to 38.6 billion euros ($42.6 billion) and bottom-line net profit also up by 3% to 2.45 billion euros, the statement said. 

Underlying or operating profit, as measured by earnings before interest and tax (EBIT), climbed by six percent to 3.97 billion euros.

Daimler said sales of its Mercedes-Benz cars grew by nine percent to 546,517 units in the April-June period. 

By contrast, sales of trucks were down 13% at 108,282 units owing to weakness primarily in the North American region.

Looking ahead, chief executive Dieter Zetsche was confident for the remainder of the year. 

"We are starting the second half of the year with record unit sales and will systematically continue along our path," Zetsche said.

"We continue to grow profitably and are well on the way to achieving our forecasts for the full year," said chief financial officer Bodo Uebber.

"We intend to make 2016 into another successful year for Daimler. However, the markets remain volatile," he added. 

In terms of revenues, Daimler said it is pencilling in a "slight increase" for the full year, with the strongest revenue growth anticipated in Asia and Western Europe.

"But business volumes should grow also in the other regions."

As for underlying profits, "on the basis of the market development and the assessments of the divisions, Daimler assumes that it will slightly increase its EBIT adjusted for special items in 2016," it said. 

At the start of July, Daimler unveiled plans to acquire the Dutch car-leasing specialist Athlon for 1.1 billion euros. 

Earlier this week, Daimler also found itself among a group of five leading truckmakers fined nearly three billion euros by the European Commission for colluding to fix prices and dodge the costs of stricter pollution rules. 

Copyright Agence France-Presse, 2016.

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