GM will invest 4 billion euros in Opel by the end of 2016

Article by Christian Andrei, on April 12, 2013

General Motors Co.’s commitment to Opel, its struggling division in Europe, has not waned. In fact, GM will be investing 4 billion euros ($5.2 billion) in Opel by the end of 2016 to fund the launch of new models. In a statement, GM CEO Dan Akerson said that as a global automotive firm, GM requires a strong presence in Europe, when it comes to production, sales, design and development.

He referred to Opel as “key” to its success. He also said that parent company GM continues to give Opel its full support. GM’s board is set to have its quarterly meeting this week at the headquarters of GM in Ruesselsheim, near Frankfurt. Since 1999, Opel’s operations in Europe have posted losses of $18 billion (which include a loss of $1.8 billion in 2012).

New models are being offered by Opel and UK sister brand Vauxhall in hopes of raising its sales. These new models include the Adam minicar, Mokka SUV and Cascada convertible. Opel said that it is slated to launch 23 new or refreshed models and 13 new powertrains by 2016.

Opel has a 10-year plan dubbed the DRIVE 2022, which aims for the company to become profitable once again by mid-decade. Aside from eliminating $300 million in expenses, Opel intends to do away with $500 million in annual costs over three years. GM is shutting down its plant in Bochum, Germany, which produces the Zafira minivan.

GM also laid off 2,000 employees in Europe last year. GM is hoping to experience a subtle improvement in its operations in Europe this year but it isn’t expected to prevent losses for the 14th consecutive year as auto sales in the region are on track to fall to their lowest levels in nearly 20 years.

It is speculated that GM may transfer Opel's assets off its balance sheet into a joint venture with alliance partner PSA/Peugeot-Citroen. It’s also possible that Opel will be sold as a whole. Akerson didn’t comment about the 4 billion euro investment pledge guaranteed that Opel would still be a fully-owned unit of GM through 2016. When asked by Reuters, Opel Chairman Steve Girsky, said that there’s no basis for reports that the company will be sold off.

Topics: gm, opel, investment

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