New GM Europe chief Karl-Thomas Neumann.
General Motors has recruited a former Volkswagen executive to run its beleaguered European operations, which have fallen ever deeper into the red for 13 consecutive years.
Karl-Thomas Neumann was named president of GM Europe, chairman of the management board of GM’s Germany-based Adam Opel AG and GM vice president. He was most recently CEO of Volkswagen’s flourishing China division.
The 51-year-old industry veteran will be given the unenviable task of righting an operation that has run up billions of dollars in losses and largely squandered its once solid reputation in Germany and the rest of the European market. GM has confirmed it will have lost as much as $1.8 billion in Europe once final numbers are tallied for 2012.
GM Vice Chairman Stephen Girsky, who had been serving as interim president of GM Europe, said in a statement that Neumann brings to GM of Europe and its principal subsidiary Adam Opel “a proven track record” in revitalizing distressed automotive businesses. His appointment is effective March 1.
Girsky predicted Neumann will “be instrumental in leading the company on a turnaround path that will be counted among Europe’s most successful.” The former Wall Street analyst will remain chairman of the Opel Supervisory Board, along with his broader corporate duties.
GM has lost more than $16 billion on the continent in 13 consecutive years of red ink, including an estimated $1.5 billion to $1.8 billion in 2012. GM reports its full-year and fourth-quarter earnings Feb. 14
Dan Akerson, GM’s chief executive officer has stated he expects to cut the European losses by one-third to one-half in 2013 and to break even on the continent by mid-decade. However, the market may make that difficult. After plunging to the lowest level since 1995 last year, sales of new cars in Europe are expected to decline again in 2013, raising new doubts about GM of Europe’s ability to recover from its falling sales in key markets in West Europe.
Adam Jonas, a managing director of Morgan Stanley, told the Automotive News World Congress that General Motors would be further ahead if walked away from its ownership of Adam Ope AG even if it had to pay another automaker to take it off its hands.
GM’s shares could jump 50% if it unloaded its ailing European Business. GM share would become more valuable, he said. The fact is the efforts to turn around Opel have been slow, and painful and expensive and it is obvious that it’s nowhere near complete, Jonas said.
Last year, Opel announced plans to cut its administrative workforce by 30% or 1,000 jobs, at its Ruesselsheim, Germany headquarters as part of GM’s 10-year plan “Drive Opel 2022.” Opel also shut down two plants in Britain, located in Ellesmere Port and Luton. The move idled 3,000 workers at the plants.
And the maker is trying to speed up plans to close a redundant facility in Germany that is currently slated to continue operating through at least 2014.
GM also signed a partnership with French automaker PSA Peugeot Citroen to share vehicle development costs on three platforms and combine purchasing and logistics in a deal expected to save GM $2 billion over five years.
But analysts caution that alliance may not yield the anticipated results due to Peugeot’s own financial struggles.