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GM Planning Another Restructuring in Europe

Did GM make a mistake keeping German brand?

by on May.03, 2012

GM CEO Dan Akerson testifying before Congress earlier this year.

Fresh on the heels of another big loss on the other side of the Atlantic, General Motors Chairman and CEO Dan Akerson confides that another big shake-up is coming in Europe.

The executive, interviewed on public radio’s The Takeaway, didn’t detail specifics of the plan but it would be the latest in a series of efforts to staunch the hemorrhaging losses at GM Europe.  Once forecast to be back in the black this year, GM Europe lost $256 million for the January to March quarter, a heavy setback at a time when other key units, including North America, are improving their profitability.

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“It’s a 4-alarm fire,” Akerson told Takeaway co-host Celeste Headlee, adding that GM’s top management is “doing everything we can to get it back in the black.”  That means, Akerson said, “We’re going to have to restructure again.”

It’s been barely six months since GM Europe underwent a previous shake-up, top managers including President Nick Reilly being transferred or forced into retirement.  He was replaced by German engineer Karl-Friedrich Stracke, while marketing guru Susan Docherty and GM Vice Chairman Steve Girsky were also assigned to bring order out of the European chaos.

Meanwhile, GM announced earlier this year plans to link up with France’s troubled PSA Peugeot Citroen, an alliance in which they will share purchasing, powertrain components and the development of some future products.  The makers hope to each save billions of dollars in the coming years, though the payoff is likely to build slowly.

But the latest red ink suggests the situation is proving more difficult to control than GM had hoped.

(For more on Europe’s losses and GM’s overall Q1 performance, Click Here.)

The situation is complicated by the debt crisis plaguing the Continent and threatening to shatter the so-called Euro Zone.  There’s a new economic problem seemingly “every day,” Akerson lamented, whether in Greece, Portugal, Italy or Spain.  Even Europe’s most powerful economies are feeling the drag as overall car sales slip into another deep recession.

A former Navy officer who spent most of his life in the telecomm industry, Akerson isn’t someone who spends a lot of time looking in the rearview mirror.  He only has time, he insisted, “for looking at what’s ahead of me.”  But when asked whether the GM board made a mistake rejecting the planned sale of a majority stake in the German-based Opel subsidiary, Akerson paused and sighed – then tried to turn the subject to the future.

“Opel maybe having a hard year,” he suggested, “but maybe in five years it will be making lots of money and North America will be in trouble.”

During his interview, Akerson also was asked about the continuing backlash surrounding the maker’s 2009 bankruptcy bailout – whether it has gotten swept up in the politics of a presidential election year and whether that is hurting the largest of the domestic automakers.

While admitting “It’s controversial,” the CEO said he believes “most people have gotten past it.”  But it continues to come up in this election year, he agreed.

“I don’t remember things being quite as divisive as they were now,” Akerson conceded. “Again, I’m not a politician. I’m not that quick, smart, on an interview like this. But I will say, I know it worked. I know jobs were saved. And I’ll tell you what. Go back to the arsenal of democracy? Great countries do two things really well. They make things. They manufacture and create value.

“Now we’ve got a 2nd chance,” he concluded. “We don’t deserve a 3rd. We’ve got to get it right this time or we don’t get it in my opinion.”

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