General Motors faces pressure to reduce Opel production, workforce

Article by Anita Panait, on February 16, 2012

Dan Akerson, chief executive of General Motors Co., is under intense pressure to balance the company’s record profits with the losses that its European operations continue to incur. For the first three quarters of the 2011 fiscal year, the company has recorded profits more than any year since around 1987. 

But its fourth quarter results could be deeply affected by Akerson’s decision to keep the company’s Opel unit, which is the biggest contributor to GM Europe’s S14.7 billion in operating losses since 1999. Analysts expect GM to post a quarterly profit lowest since it emerged from bankruptcy in 2009.

With that in mind, Akerson might be forced to implement production and job cuts at Opel just to keep GM posting profits. GM is expected to reveal in its fourth quarter report the depth of pension shortages and the continued worsening of sales in South America, where low-cost imports are posing a great threat to market leaders.

Itay Michaeli, an analyst at Citigroup Inc., said that what investors are “afraid” of is that restructuring would become more difficult due to the negative reports about Opel. He said that investors are worried about the damage to market share and sales.

He added that the investors’ patience for the brand to achieve a credible plan to break even is “slowly wearing thin.” In the first three quarters of 2011, GM managed to grab more market share in the US and it was able to wrestle back its crown as the largest automaker in the world.

Topics: gm, opel, production

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