GM sees $600 million expense due to currency swings in Venezuela image

The largest US automaker and the third biggest in the world, General Motors, has recently announced it would incur a pre-tax charge of around $600 million because of currency devaluation in Venezuela.

The move shows automakers are once more in jeopardy if they operate in the South American country, with GM’s “re-measurement” being for the automotive cost of sales in the troubled economy during the second quarter of the year, according to a company filling with the US Securities Exchange Commission. The automaker is due to announce its second quarter financial earnings on July 23. The Venezuelan currency expense is going to be booked as a special charge for EBIT-adjusted reporting purposes, with the company confident it would not hinder its South American or Venezuelan operating results, nor impact the 2015 adjusted free cash flows, according to the SEC report. Venezuela opted to devalue its currency after last year the international crude oil price plunged, while the country also went through a massive political crisis that further hit the already feeble economy.

The turmoil seen in the South American country has also challenged other carmakers such as Ford and FCA US, which have divisions operating in the country. Ford in January also took a charge of $800 million because it had trouble converting the local currency into dollars. All three Detroit makers have started writing down assets in Venezuela starting with the first quarter and Ford even moved to sell some of its models in dollars.