General Motors Co.
) announced that it will have to incur a pre-tax charge of $400
million in the first quarter of 2014 due to change in the
exchange rate of Venezuelan currency Bolivar Fuerte (BsF). The
charge is a result of the re-valuation of the non-U.S. Dollar
denominated monetary assets and liabilities of General Motors'
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The current exchange rate used by General Motors stands at 10.7
BsF per U.S. dollar. The previous rate was 6.3 BsF for a dollar.
General Motors reported the currency rate change in a government
On Feb 13, 2013, the Venezuelan government had set the official
exchange rate of Bolivar Fuerte at BsF 6.3 to $1.00, an update
from the previous rate of BsF 4.3 to $1.00. Owing to this
devaluation, General Motors had to incur a $0.2 billion charge in
the three months ended Mar 31, 2013.
Not only General Motors, another automaker
Ford Motor Co.
) also announced that it will have to face the brunt of
volatility in the Venezuelan currency. Ford will incur a charge
of $350 million in the first quarter of 2014 due to the currency
exchange rate change. The current exchange rate for Ford stands
at 10.8 bolivars for a U.S. dollar as against the previous 6.3
Ford also announced that it is facing difficulties in Venezuela
due to the shortage of hard currency. Consequently, the automaker
reduced the output from the Venezuelan plants by 75% in the
fourth quarter of 2014. It also apprehends reduced production in
the country this year owing to the decline in Venezuelan car
At present, Venezuela is going through a rough phase. Government
initiatives of price control and limited supply of foreign
currency are affecting business and Ford's results in the region.
General Motors currently holds a Zacks Rank #5 (Strong Sell).
Better-ranked automobile stocks worth considering are
Tata Motors Ltd.
Tesla Motors, Inc.
). Both the stocks sport a Zacks Rank #1 (Strong Buy).