GM's Opel to Offer Car Loans to Bolster Sales in Europe

General Motors Co. (GM)’s Opel brand is starting loans for purchases of new cars as the unprofitable European division of the world’s second-biggest automaker seeks to increase vehicle sales in its home region.

Opel Financial Services, operating since April, will offer consumers more attractive financing deals, including zero interest rates with no down payment, Opel Chief Financial Officer Michael Lohscheller said today at a press conference.

The lending business, which is starting in eight European countries, “is an integral part of our plan to gain market share and return to profitability,” Lohscheller said at Opel headquarters in the Frankfurt suburb of Ruesselsheim.

The new business is part of Detroit-based GM’s resumption of offering car loans after the automaker disposed of the business now known as Ally Financial Inc. (ALLY) starting in 2006. The Opel lending unit will be part of GM Financial Co., a U.S. car- loan business which bought part of Ally’s operations in Europe, Latin America and China at the beginning of April.

GM’s European operations, which also include Opel’s U.K. sister car brand Vauxhall, narrowed their first-quarter loss to $175 million from $294 million a year earlier. GM’s deficit in the region since 1999 exceeds $18 billion. The U.S. company has laid out plans to invest $4 billion through 2016 to develop 23 new vehicles and 13 new engines to ensure the European division’s turnaround and succeed in breaking even by 2015.

Peugeot Unit

The auto-lending business of Paris-based competitor PSA Peugeot Citroen (UG), Europe’s second-largest carmaker, received 7 billion euros ($9.17 billion) in French state guarantees for new bonds last year. The arrangement is subject a European Union regulatory probe into whether it meets state-aid rules.

GM’s investment in Ally’s European assets totaled $1.7 billion, Lohscheller said. About 40 percent of Opel’s new car sales are financed, compared to an average of 50 percent in the European auto market, the GM unit said. The Opel car-loan business will operate as Vauxhall Finance in the U.K.

GM is working to maintain market share this year amid a sixth consecutive industrywide contraction in car sales in Europe. Combined Opel and Vauxhall first-quarter registrations in the region fell 7.9 percent, less than the market’s decline of 9.7 percent, according to figures from the ACEA trade group.

The U.S. company’s moves to restore profit in Europe also include reducing spending, including the shutdown of a car plant in Bochum, Germany, at the end of 2014. Workers at GM’s other four plants in the country agreed to a wage freezes in return for GM’s pledge to avoid mass firings through 2016.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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