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Opel head says 'Brexit decision not a good omen'

Vauxhall car lot Image copyright Getty Images

The head of Opel has described the UK's decision to leave the European Union as "not a good omen" for General Motors in Europe.

Karl-Thomas Neumann said in a video message that the outlook for the second half of 2016 was going to be "anything but easy".

Despite reporting a global second quarter profit of $2.9bn (£2.1bn) in the period between April and June, a 157% rise from last year, Opel's parent company GM said it would cut costs across Europe.

It said it was concerned about currency depreciation and market disruption.

"We are facing strong headwinds at the moment, particularly in our largest market - the United Kingdom," Mr Neumann also said in the video, which was posted on his twitter account.

The European division, which includes the Vauxhall brand in the UK, reported a second quarter profit of $0.1bn, its first profit in five years.

Nevertheless GM indicated cost cutting was on the cards as the effect of Brexit could cost it up to $400m.

GM did not give out specifics about where those cuts would come from. The company's chief financial officer Chuck Stevens said "everything is on the table".

US strength

The US continued to be the carmaker's strongest market despite a dip in sales by 4.4% during the first half of the year.

Sales of sports utility vehicles (SUV) and trucks, which have higher price tags than other cars, meant GM was able to earn more per customer than past years.

The North American unit reported $3.2bn in free cash flow and expects to generate $6bn in cash for the year.

Image copyright Getty Images
Image caption GM chief executive Mary Barra said the company had a strong quarter

The Chinese unit- which GM runs as part of a joint venture- also had a record quarter. The division delivered 1.81 million vehicles a 5.4% increase from last year.

"This was an outstanding quarter for GM," said chief executive Mary Barra.

GM announced it was raising its full year earnings expectations from between $5.25 - $5.75 per share to $5.50 - $6.00 a share.

Expanded recall

The company also said it may be forced by the US government to recall up to 4.3 million more vehicles due to issues with the Takata airbags in the vehicles. The move would could cost GM $550m.

The front passage seat frame in affected cars can rub against the wiring for that seat's airbag sensor.

Damaging the wiring could prevent the airbag from going off in a crash. GM said it was aware of two injuries that resulted from crashes where the airbags were affected by this issue.

GM has already recalled 2.5 million vehicles that it says may cost $320m to fix.

Driverless investments

Also on Thursday, GM revealed it purchased Cruise Automation, a self-driving car start-up, for $580m earlier this year.

The purchase follows a string of investments by GM into driverless technology. In January the carmaker announced a deal with the ride-hailing service Lyft to develop a fleet of driverless vehicles.

Last month GM increased its push by announcing a $10m investment in Canada where the company has a cold weather centre it uses to test self-driving vehicles.

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