GM CEO Dan Akerson (r) and Vice Chairman Steve Girsky driving a classic 1960 Corvette.
Despite mounting losses that could near $2 billion this year – and increasing demands that it abandon its troubled European operations – General Motors insists it remains committed to a turnaround at the Opel brand.
The maker hopes to reverse what will likely be its 14th consecutive year of losses by rolling out a procession of new products – at the same time it takes steps to slash costs and reduce excess capacity.
But critics contend GM could be running out of time and suggest that its fiasco in Europe is a major factor suppressing its stock price and holding back a long-sought upgrade in its debt rating.
GM Europe has undergone a series of shake-ups in recent months – notably the ouster of senior managers including CEO Karl-Friedrich Stracke earlier in the year. That left Steve Girsky, a former Wall Street analyst and now GM vice chairman, in charge of setting the latest in a series of turnaround courses.
Girsky outlined key elements of that plan, this week, during a strategy session with Opel dealers in Germany. The primary focus of the event was to detail the 23 new models the brand plans to bring to market over the next four years, including the all-new Adam city car, named for company founder Adam Opel.
The executive also tried to reassure dealers that GM is in Europe for the long haul, something that has been less than certain in recent years. Following the American maker’s emergence from bankruptcy in July 2009 it began looking for a partner and came close to selling off a controlling stake in Opel to a consortium headed by Canadian mega-supplier Magna International.
The deal was scuttled just before its completion – largely due to opposition by Girsky and his boss, GM board member Dan Akerson who is now the carmaker’s chairman and CEO.
But the issue was revived when Morgan Stanley’s influential analyst Adam Jonas issued a report arguing that, “We believe the time has come for GM to find a new home for Opel.”
Girsky told dealers that’s not part of the GM plan – though in a subsequent interview with the New York Times he seemed to leave all options open, suggesting, “I don’t want to leave anyone with the impression that we will be satisfied continuing to lose the amount of money we are losing.”
Since plunging into the red, GM Europe has run up more than $16 billion in losses and after a dismal first half forecasts estimate it will post a deficit of between $1.5 billion and $2.0 billion for all of 2012. That’s suppressed GM’s stock price for much of the year and led key ratings agencies to take an arm’s length position on the maker — though Toronto-based DBRS last week gave GM its first investment-grade rating in more than half a decade.
Girsky has been struggling to come up with a turnaround plans that will not only meet muster with investors and analysts but, perhaps more importantly, will be something he can sell to both Opel’s unions and European regulators. Both have strongly resisted proposals to cut employment and close plants, though there are signs that even the militant German labor organization, IG Metall is softening its stand.
Part of the reason, said Girsky, is that GM is following a policy of “transparency,” giving all interested parties a clear understanding of the problems it needs to solve.
Over-capacity is a major piece of that and it now appears IG Metall will accept the closure of at least one German plant – though that is still well short of what most analysts see as necessary. An alternative Girsky is studying could bring non-Opel products into some of the factories now operating well below capacity. Those could then be sold in Europe or perhaps some other markets – though the challenge with exports is the high labor cost of German production.
One possibility would be producing products badged Chevrolet, as that is one of the fastest-growing brands in the European market – in fact, some, though not all, analysts believe GM might eventually sell or abandon Opel in favor of the more globalized Chevy.
Among the 40,000 employees GM has in Europe a third are managerial and, as TheDetroitBureau.com recently reported, Girsky is considering ways to cut thousands of those on the white-collar rolls.
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Even with the new product blitz planned for Europe, not everyone is confident Opel can revive. Part of the problem is that its brand image has been sorely tarnished over the years and may not be salvageable, analysts like Morgan Stanley’s Jonas have warned.
With the overall European auto industry continuing to founder it’s questionable there’d even be a buyer if GM did return to that option, however. In 2009, GM had a number of bidders to consider, including not only Magna’s Canadian-Russian offer, but also a bid from Italy’s Fiat.
But going forward, count Fiat out, said its CEO Sergio Marchionne. “There was a window of opportunity for Opel and it opened and it closed.”