General Motors Company (GM) Posts Profit Despite Huge European Loss

Looking ahead
As competition is intensifying in the domestic market, particularly after Toyota Motor Corporation (ADR) (NYSE:TM)’s comeback, it is extremely essential for the carmaker to strengthen itself with a strong product line. As per Autodata Corp., the company’s US sales improved 3.7% to 2.6 million vehicles last year against the industry rate of 13.4%. Its market share also shrank to 17.9% in 2012 compared to 19.6% in 2011. Both Japanese and European automakers are eyeing the US market. While Japanese auto giants expect to benefit from the weakening yen, European players are trying to earn some profits to compensate for the sluggish domestic market.

The US auto giant has plans to cut down its annual European expenses by $500 million in the next three years. It proposes to shut down a German factory in an effort to reduce capacity as demand in this region has remained weak for six years in a row. Other than this, the company plans to launch 23 new models by 2016 to revitalize demand.

While the European market has been a complete failure, the Chinese market is showing long term growth potential where General Motors Company (NYSE:GM) is the top foreign automaker, closely followed by Volkswagen. Both GM and Ford recently benefitted from the political turmoil between China and Japan which made Chinese buyers to shun Japanese brands including Toyota, Nissan and Honda. Toyota’s sales fell 49% in September, 44% in October and 16% in December in the mainland.  Dull outlook for the Japanese automakers gives GM the opportunity to boost sales. In addition, China Association of Automobile Manufacturers forecasts the industry to experience 7% growth and cross the 20 million vehicle mark this year.

The bottom-line
The largest US automaker GM, which recently lost its world title for the top automaker to Toyota, has to take serious measures to take care of the European losses. Though the US and Chinese markets are lucrative, the European market loss keeps eating away the profits earned. The company expects to breakeven in the European market by 2015, until then it has to make sure that the other regions earn large enough revenue to offset severe setbacks in Europe.

The article General Motors Posts Profit Despite Huge European Loss originally appeared on Fool.com and is written by Rajesh Marwah.

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