General Motors Company’s (GM) European arm, Opel, revealed that it expects to report an operating loss of EUR1 billion ($1.3 billion) due to fewer car sales than anticipated. The unit expects to sell 1.4 million vehicles in 2012, which is about 100,000 units less than the earlier projection.
The downgraded forecast is possibly based on the weakening market conditions in Europe due to the eurozone crisis and ailing condition of the unit, which GM had planned to bail out a couple of years ago.
Previously, GM expects Opel to break even in 2011 and achieve profitability in 2012, following a 20% capacity reduction across Europe. The company now expects to report annual profits of EUR1 billion and 5% return on sales by 2016 based on a market share of 8.5% in Europe.
Presently, Opel is banking on its yet-to-be-launched electric vehicle, Ampera that is based on the technology used in Chevrolet Volt. Opel’s plan to start delivering the vehicle late this year has been stalled following an investigation by National Highway Traffic Safety Administration (NHTSA) regarding the safety of its kin, Chevrolet Volt, which has failed in a series of crash tests.
Both Volt and Ampera are assembled at GM’s plant in Hamtramck, Michigan. Both the vehicles use lithium-ion batteries to power their electric motors. As a result, the automaker has decided to sell the vehicle after ensuring Ampera’s batteries are safe in the event of an accident. Opel expects to sell 10,000 units of the hybrid across Europe in 2012.
GM, a Zacks #3 Rank (Hold) company, posted an 11% decline in profit to $1.74 billion in the third quarter of the year from $1.96 billion in the same quarter of 2011. Nevertheless, on a per share basis, the profit of $1.03 was higher than the Zacks Consensus Estimate of 99 cents and compared with $1.20 in the third quarter of 2010. The decline in profit was attributable to lower interest income and other non operating income (net), loss on extinguishment of debt and income tax expense.
Meanwhile, GM’s cross town rival Ford Motor Co. (F) posted a $66 million or a 3.5% fall in profit to $1.85 billion in the third quarter of the year from $1.91 billion in the same quarter of prior year. However, on per share basis, earnings were 46 cents versus 48 cents a year ago, beating the Zacks Consensus Estimate of 44 cents. The decline in profit was attributable to a fall in commodity prices and anticipated reductions in Financial Services results.
