GM economist: No Brexit impact to U.S. auto market now; more UK car production possible - Metro US

GM economist: No Brexit impact to U.S. auto market now; more UK car production possible

The GM logo is seen at the General Motors Warren Transmission Operations Plant in Warren, Michigan October 26, 2015. Photo taken October 26. REUTERS/Rebecca Cook
By Bernie Woodall

By Bernie Woodall

DETROIT (Reuters) – It is too soon to measure the impact of the British vote to leave the EU on General Motors Co but the decision will likely not have much effect on the company in its home market, GM’s chief economist said on Wednesday.

Mustafa Mohatarem said the most immediate likely impact for U.S. auto sales was a positive one as last week’s referendum result brought with it a greater chance that U.S. interest rates “will remain lower longer” than if British voters had decided to stay in the European Union.

He set the chance that Federal Reserve Chair Janet Yellen will push to raise rates this year at less than 20 percent. “If the U.K. had stayed in the EU, the thinking was that a rate hike would come in July or September,” Mohatarem said.

U.S. auto sales set a record last year and may set another one in 2016 in part because consumers are taking advantage of low- and no-interest auto financing.

Overall, Mohatarem said, GM “will wait until the dust settles” before more deeply assessing the impact of the Brexit vote on the company and the global auto market.

“How can you asses the impact of something if the rules are not yet set?” he said referring to the lack of certainty around how Britain will exit from the European Union.

He said that over time there may be a greater chance for additional production at GM’s two plants in England, but he cautioned that the British pound, down about 10 percent against the dollar since the referendum result, would have to maintain a low exchange rate to the dollar for that to be realized. GM’s two plants in England assembled about 13.5 percent of Opel and Vauxhall vehicles in 2015.

Mohatarem said those two plants, one in Ellesmere Port that makes compact cars and one in Luton that makes commercial vehicles, are running near capacity, but the company could find a way to boost production if economic conditions were favorable.

On prospects for auto industry sales in the United States, Mohatarem said GM has not pulled back from its bullish forecast of industry sales of 18 million vehicles, including medium and heavy trucks, that it gave at the start of this year.

That would equate to light vehicle sales of about 17.6 million vehicles, which would break last year’s record of 17.47 million vehicles, using Autodata Corp figures.

Mohatarem said he sees “no reason” why sales should not remain at current high levels through 2018.

(Reporting by Bernie Woodall in Detroit; Editing by Frances Kerry)

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