General Motors sees more cost-cutting measures in Europe

Article by Anita Panait, on February 18, 2012

General Motors Co. announced that there will be more cost cuts for its loss-making European unit following the failure of the last turnaround plan to end losses there. GM Chief executive Dan Akerson said that the company has to match capacity with demand, and since Europe’s demand has been falling, the carmaker also has to cut capacity.

Akerson said the company is considering all options just to achieve “a better break-even point, a lower break-even point, and scale," adding that there is more to come in the next couple of months. The company’s European operations, which include Opel/Vauxhall, posted $747 million in losses in 2011 before taxes and interest. The loss was significantly lower than the unit’s losses in 2010, which reached $1.95 billion, but it reflected the company’s failure to achieve the break-even it had planned.

GM announced in November that it was withdrawing its break-even forecast as the European outlook worsened. Akerson is looking forward to implement a similar strategy GM utilized to recover from bankruptcy almost three years ago and that had catapulted the company back as the world's largest automaker. The company then closed plants and implemented job cuts in the US, cutting costs while increasing sales.

"There's a general recognition by all constituencies that the situation in Europe today is not a whole lot different than it was in the United States or North America, generally, three-plus years ago," Akerson told industry analysts during a conference call, says Autonews. The company’s Opel unit continues to lose market share to major competitors like Volkswagen and Hyundai.

Opel is visibly hurt from the drawn-out rescue effort in the wake of GM's bankruptcy. According to industry association ACEA, Opel's new-car sales fell nearly 21 percent to 57,479 in the EU and EFTA countries in January, reducing the brand market share from 6.8 percent in January 2010 to the current 5.7 percent.

Opel is hoping to increase volume outside Europe as the eurozone crisis continues to hurt its sales. This is why the German carmaker wants to further expand its sales in China. For that to happen, Opel may decide to team up with Chinese automaker SAIC, according to German newspaper Handelsblatt. Opel has been holding discussions with SAIC about a sales partnership to sell and distribute its cars in China. Interestingly, GM operates a joint venture with SAIC in China.

As Handelsblatt reported, Opel may increase the number of dealers in China selling its cars from just 50 to between 200 and 300 retailers with the assistance of SAIC.

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Topics: gm, europe

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