GM CEO Dan Akerson is coming under increasing pressure to fix -- or dump -- Opel.
General Motors Chairman and CEO Dan Akerson recently let his guard down for a brief moment, hinting GM made a mistake by not selling off its Opel brand back in 2009, shortly after the U.S. giant emerged from bankruptcy.
Apparently, a growing list of analysts and other observers would agree, warning that the U.S. maker simply won’t be able to stop the hemorrhaging of the German-based Opel which is now heading for a 13th year of red ink.
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“One of the worst things in the auto industry is owning a cash-burning, resource-consuming business,” warns Adam Jonas, lead auto analyst for Morgan Stanley, who has now downgraded GM shares to “overweight,” largely due to the continuing problems the maker has in Europe. “We believe the time has come for GM to find a new home for Opel.”
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.”
General Motors’ top executive has made another attempt to head off rumors that the maker’s long-troubled Opel subsidiary is for sale.
“We don’t comment on speculation,” GM chairman and chief executive officer Dan Akerson said before doing precisely that during a brief news conference at a GM assembly plant in Detroit called to officially discuss the opening of contract talks with the United Auto Workers
“Opel is not for sale,” Ackerson emphasized, reiterating a comment he made earlier in the month – which apparently did little to quell reports in Germany that the subsidiary would be placed on the market. Whether his latest comment will finally quash speculation remains to be seen in light of Opel’s ongoing problems.
Former GM engineer Frank Weber helped guide development of both the Chevy Volt and its near-twin, the Opel Ampera, shown here.
Again battling speculation about the possible sale of Opel, which has been circulating in the German press, General Motors has dropped its usual policy of not commenting on speculative stories by firmly stating the long-troubled subsidiary is not for sale.
GM came close to selling off a majority stake in Opel two years ago, and many observers, especially in Germany, believe that with Opel’s recovery still stalled GM might be once again looking for a buyer. The long-running rumors gained momentum when Volkswagen chief executive officer Martin Winterkorn. Winterkorn last week suggested GM was trying to sell Opel.
“In Wednesday’s edition of the Frankfurter Allgemeine Zeitung, Volkswagen CEO Martin Winterkorn commented on rumors regarding Opel, which continues a regrettable pattern of fanning speculation as Opel makes solid progress in its restructuring, in generating improved operating results and more,” GM said in statement posted on the company’s media web site.
Opel reveals the newest Corsa -- which could come to the U.S., according to a senior Opel exec..
It’s one of the best-known nameplates in Europe, but few Americans know the “blitz,” the lightning-strike logo of German-based Opel. But that could be about to change, says a senior executive with the General Motors subsidiary.
The brand’s chief counsel apparently sees an opportunity to sell Opel’s fuel efficient small cars to increasingly mileage-sensitive American motorists. The move could help the struggling Opel overcoming a decade’s worth of financial problems – and prevent the rumored GM plan to sell off the floundering marque.
There’s just one problem, industry analysts warn: at the current exchange rate, the dollar is worth less than 0.7 Euros, which makes it extremely difficult to turn a profit importing luxury cars from Europe, never mind econoboxes like the Opel Corsa.
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“The brand had a good reputation in the United States,” Opel Chief Counsel Klaus Franz told the Stuttgart-based Auto Motor und Sport.
He said a study is already underway and that the new model could come to the States by 2013 under the nameplates Junior or Allegra.
Hints that General Motors is thinking about dumping Opel are circulating again, especially in Germany, where the maker is based.
Concerns about Opel’s future were initially touched off as GM plunged into bankruptcy and came close to selling off a majority stake in the European subsidiary. Ultimately, GM decided to hold onto Opel but, earlier this week, CEO Dan Akerson declared that Chevrolet would become the carmaker’s lead global brand, a position that once was reserved for Opel.
Now, the German news magazine Der Spiegel, one of Europe’s most influential and authoritative publications, reports GM appears to be getting ready to sell Opel off again after backing out of the 2009 deal that would have turned control of the German operation over to a troika that included Magna and Russian bankers and investors.
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However, Der Speigel said GM’s top management, namely Chairman and chief executive officer Akerson, are growing impatient with the lack of progress in regaining profitability. Opel has steadily lost money for the better part of a decade but the problems were always overshadowed by the larger issues looming over the parent company back in Detroit.
Opel CEO Nick Reilly will have to lead a turnaround without government aid.
After having the Berlin government reject a bailout request for its troubled Opel subsidiary, General Motors is withdrawing a bid for help from other European governments and will now seek to fund the operation’s recovery on its own.
The announcement is the latest twist in a saga that began even before GM’s own U.S. bankruptcy, last year, which triggered a $50 billion package of aid from the American Treasury. At one point, while the giant automaker was struggling for survival, it gave serious thought to selling a majority stake in German-based Opel and its British sibling Vauxhall.
But in recent months, with its own recovery proceeding better than anticipated, GM has not only been able to hang onto Opel, but now believes it can handle the financing of the unit’s turnaround.
“Given the need to proceed quickly,” a GM statement said, it can no longer wait while trying to negotiate assistance from various European governments. That bid was dealt a severe blow, last week, when the administration of German Chancellor Angela Merkel rejected the latest request for Opel aid.
Despite some recent successes, with products like the new Insignia, Opel will cut capacity by up to 25%.
While it is “still finalizing” details of a turnaround plan for its troubled European subsidiary, Opel, General Motors expects to reduce its capacity by as much as 25%, a senior official revealed today, which would likely lead to a massive cut in jobs.
Earlier this month, GM reversed plans to sell a majority stake in Opel, which not only provides product for much of the company’s overseas dealers, but also serves as a major global product development center for brands like Chevrolet.
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The unexpected move has kicked off worker protests and rage among German politicians, who had brokered a proposed deal between GM and the Canadian auto supplier Magna International. It has also generated concerns that Opel would be targeted for big cuts in an effort to staunch multi-billion-dollar losses.
That is an eventuality that Nick Reilly, Adam Opel GmbH’s acting CEO, confirmed in a corporate blog entry, today. “What is clear is this: Opel/Vauxhall must reduce its capacity across Europe by somewhere between 20 and 25 percent,” said Reilly, who also serves as head of GM’s international operations.
The pronouncement was no surprise, nor was Reilly’s comment that, “We are still finalizing the details on the plan.” He and other GM officials are set to meet with representatives of Opel’s European unions, next week, and it is likely the automaker will press to get back the concessions workers withdrew after the sale to Magna collapsed.
Meanwhile, the company will face off with government officials representing the five European countries where Opel has plants. Enraged politicians, in Berlin, not only withdrew an offer to aid the new owners, had the sale gone through, but demanded GM immediately pay back a $3.7 billion bridge loan that had kept Opel out of bankruptcy.
Whether the Germans will now weigh back in is unclear, but representatives from Britain and several other countries have expressed interest in offering their own incentives, which could impact where the future cuts in employment occur. It has been widely expected that at least 10,000 Opel jobs – equal to 20% of the workforce – will be eliminated. Under the Magna deal, a disproportionate share of cuts would have taken place outside Germany, even though that country’s factories were considered among Opel’s least efficient.
The German government called the loan when it became clear that German jobs would not be overly protected in a GM reorganization.
General Motors has returned to German taxpayers another €200 million ($299.3 million) on the Opel bridge loan that was made last spring when it was planning on selling its loss making European arm.
GM has since decided to reorganize Opel by itself, and the German government called the loan when it became clear that German jobs would not be overly protected compared with other Opel/Vauxhaul locations in the United Kingdom and Europe.
GM now has an outstanding balance of €400 million, which GM expects to pay back by November 30,” according to Enrico Digirolamo, GM Europe Vice President and Chief Financial Officer.
With production restarted after its 60-day bankruptcy proceeding, GM is once again generating cash and paying down some of its debt.
With the Opel bridge loan, GM had a balance of €900 million (~$1.3 billion) as of September 30, 2009. Opel has already repaid €500 million (~$0.7 billion) of that in November, and will repay the remaining €400 million (~$0.6 billion) balance by the end of the month. The cash balance in Europe as of September 30, 2009 was $2.9 billion.
British-born Reilly will temporarily fill in as Opel CEO while GM looks for a permanent replacement for former boss Carl-Peter Forster.
Globe-trotting British auto executive Nick Reilly, who has been running General Motors’ big Asian operations, is relocating halfway around the world – for now, anyway, as the temporary CEO of the maker’s troubled Opel unit.
The German-based Opel is in the midst of turmoil surrounding GM’s decision to back out of its planned sale to a Canadian-Russian consortium led by the giant auto supplier Magna International. The proposed deal, which had been forcefully backed by the German government, would have left GM a minority player, and was seen as a challenge to using Opel as a global product development center.
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Last week, Opel’s CEO Carl-Peter Forster announced his resignation. He is expected to go to work for Jaguar-Land Rover, the British luxury marques now owned by India’s Tata Motors. That put GM into a scramble to find a new Opel boss who could manage the reverberations of the failed sale. German political leaders have raged about GM’s decision and German workers – who expected to get a 10% stake in the company after the sale – initially staged a walkout and withdrew an offer to grant Opel concessions.