Profit at General Motors Surges During Latest Quarter

Detroit automaker increases its outlook for 2016 but warns that Brexit might cost it as much as $400 million during second six months of the year.

General Motors helped by strong SUV and truck demand from within its core market was able to post an increase of more than 157% in its net profit for the second quarter in comparison to last year during the same quarter.

Nevertheless, the concern that the United Kingdom leaving the European Union will have big financial impact worries some.

On Thursday, GM posted attributable net income to its common stock holders of just over $2.9 billion, which is up from last year during the same period of $1.1 billion.

General Motors said that its operating profit was equal to $1.86 a share which soundly beat expectations on Wall Street that were for $1.49 per share.

Revenue increased 11% to just over $42.3 billion compared to last year during the same period of $38.2 billion.

The Detroit based automaker benefitted from an ongoing shift across the U.S. market to SUVs and trucks from passenger cars, rising sales across China and the improved conditions experienced in Western Europe.

Operating margins globally of 9.3% and 12% across North America represent records since the automaker left bankruptcy, said the company.

Those came despite the mostly flat sales as well as a decline in U.S. market share.

GM posted profit of nearly $100 million in its operations in Europe, its first profit for a quarter in that region in 5 years.

Its operating margin of 9.5% in China was just lower than for the same period last year, but the performance of the company in the largest market for autos in the world remained stable.

The results give credibility to the strategy by Mary Barra the CEO of slimming the company to put more focus on its profitability that on gaining more market share.

The company in the U.S. has backed away from sales at lower margins to rental car businesses and resisted adding more capacity to production to keep its costs lower.

However, GM said that the uncertainty that was created by the referendum vote in the UK to leave the EU has impacted in a negative way on the pound in Britain, which could hurt its sales and production activities there.

This impact could cost GM, said company officials as much as $400 million and put into jeopardy the goal of turning its European business profitable in 2016.

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David Glass

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