The massive losses racked up over the last 16 years in Europe pose one of the toughest challenges handed over to GM’s new CEO Mary Barra.
But while the new chief executive officer says she has no hard and fast deadline for completing the turnaround of GM Europe and its principal subsidiary, Adam Opel AG, she is optimistic the worst is over.
“We said we expect GM Europe to be profitable by mid-decade,” the 52-year-old Barra told reporters during a meeting at the company’s headquarters in Detroit’s towering Renaissance Center. “Obviously it’s important to operate profitably everywhere we operate,” she said.
GM Europe has rolled up billions of dollars in deficits since plunging into the red just before the new millennium, and it is expected to post another major loss when the parent company announces its full 2013 financial results in the coming weeks.
But GM officials are beginning to show signs of cautious optimism based on the latest turnaround plan crafted by former Vice Chairman Steve Girsky. Among other things, it will see the closure of an unneeded plant in Germany, a relatively unheard of move on a continent that makes it extremely difficult for manufacturers to cut jobs. But GM is intent on matching European capacity to demand in a market that has been in a deep recession for a number of years.
Barra made it clear that GM Europe will have another loss in 2014 and said she does not have any hard deadline for the turnaround to take hold and produce a profit.
“Europe is an important market,” noted Barra, who became the first woman to lead GM when she assumed the CEO’s role from the retiring Dan Akerson on Jan. 15. “I’m a glass half-full kind of person. I think Europe is very great opportunity for GM,” she added.
Opel has been the proverbial hot potato for GM’s top executives dating back to Chairman and CEO Rick Wagoner, who was ousted as the maker entered bankruptcy in 2009. At one point, his successor Fritz Henderson came close to selling off a majority stake in the European subsidiary, only to scrub that plan at the last minute. More recently, Akerson defied calls by several influential automotive analysts to dump Opel.
“We’re no longer talking about the viability of Opel,” Barra said. Instead the focus is on filling its showrooms with desirable products “and rebuilding the image of the Opel brand,” said the new CEO, who has served on the Opel Board for the past couple of years. “We’re going to do everything we can to strengthen the Opel brand.”
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GM’s Chinese operations stand in sharp contrast to Europe and now account for more vehicle sales than the core North American market. GM is investing heavily in the booming region and soon expects to have capacity in place to roll out 5 million vehicles annually in China. But there are some challenges, notably the fact that GM last year slipped to second place behind market leader Volkswagen AG.
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Again, showing her focus on the half-full glass, Barra declared that, “Clearly we have great opportunities in China.” And showing the impact of her previous assignment as GM’s global product development chief, Barra added that, “To me, what’s important is we’re focused on the product.”
GM recently launched production of its Cadillac XTS model in China. And while the Buick brand has been its powerhouse in the country, Barra said its most global marque, Chevrolet, has a “great opportunity” to thrive in China, where the brand has tended to lag behind not just Buick but indigenous brands tied to GM such as Wuling and Baojun.
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Barra also stressed GM remain focused on targets such as achieving a 10% profit margin in North America and reaching the 5-million sales mark in China — all by mid-decade.