July 12 (Bloomberg) -- General Motors Co., struggling to stem losses in Europe, said the head of operations there stepped down and named Vice Chairman Steve Girsky as interim chief.
GM’s leadership had lost patience with Karl-Friedrich Stracke, head of GM Europe since Jan. 1, because the company needed faster changes as the European market is heading for a fifth straight year of declining sales, two people familiar with the situation said. The people asked not to be identified discussing internal deliberations.
“It certainly indicates that the turnaround plan is not proceeding as planned or anticipated,” Dennis Virag, president of Automotive Consulting Group Inc. in Ann Arbor, Michigan, said today in a telephone interview.
Chief Executive Officer Dan Akerson, who oversaw GM regaining its title of world’s largest automaker last year and posting a record full-year profit of $9.19 billion, is pushing the Detroit-based company to fix its European operations, which have lost $16.4 billion since 1999.
“Who wants to do the job of dealing with the endgame of two decades of GM mismanagement?” Arndt Ellinghorst, a London-based Credit Suisse analyst, said in an e-mail. “This is a very tough and indeed sad undertaking.”
GM slid 2.9 percent to $19.33 at close in New York. The shares have plunged 41 percent since the company’s November 2010 initial public offering.
Stracke had become head of GM Europe after assuming command of the Ruesselsheim, Germany-based Adam Opel division in April 2011.
“Karl Stracke worked tirelessly, under great pressure, to stabilize this business and we look forward to building on his success,” Akerson said in an e-mailed statement. Stracke will “take on special assignments” and report to the CEO, according to the statement.
Girsky last year was named to head the supervisory board of Opel. The executive will probably hold the interim position for only a short time while GM searches inside and outside of the company for a replacement, said one of the people familiar with the executive moves.
“It will be a brave man or woman to take on that challenge,” Rebecca Lindland, an industry analyst with IHS Automotive, said in an e-mail.
GM had been on track to break even last year in Europe until November, when it rescinded its forecast as its economic outlook there worsened. In February, GM reached a deal with PSA Peugeot Citroen, Europe’s second-largest carmaker, to form an alliance that includes purchasing and vehicle development. Under that alliance, GM is now the second-largest shareholder after the Peugeot family of the Paris-based automaker.
The U.S. carmaker has also negotiated new labor agreements with workers in the U.K. to improve productivity and is in talks with unions about closing a plant in Bochum, Germany, which would be the first car factory to shut down in that country since World War II.
Akerson said June 28 he was concerned about the second half of this year because of the softening European economy. Opel’s board approved that day a business plan that runs through 2016, which Akerson said gives the company “a good shot” at profitability in Europe.
“If you look out five years, I would be disappointed if we couldn’t get to profitability,” Akerson said at the time.
Peugeot today reported plans to shut the first auto factory in France in 20 years and reduce its workforce by 6.7 percent. The company will cut 8,000 additional jobs on top of 6,000 announced last year.
Ford Motor Co., based in Dearborn, Michigan, said late last month that overseas losses, including in Europe, may have tripled in the second quarter from the $190 million deficit reported during the year’s first three months.
GM’s Girsky had warned in April that work to stem losses in Europe, which includes Opel operations, will occur in incremental steps.
The timing of today’s announcement, after the end of the second quarter and before reporting earnings Aug. 2, “bodes poorly” for GM Europe, Peter Nesvold, an analyst with Jefferies & Co., said in a note. “Although we have not seen volumes impacted much in Europe yet, our sense is that pricing is weakening.”
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