March 29 (Bloomberg) -- General Motors Co. will pull Opel from China next year after failing to gain traction in the market over the last two decades and will invest in Europe to boost the German car brand’s sales in its home region.
Opel, which has been in China since 1993, never grew beyond a low-volume, niche player in the country, accounting for less than 1 percent of GM’s sales in the market last year. The marque will spend 245 million euros ($337 million) to add two models at the main Ruesselsheim factory in the coming years, according to a press release posted on its Website yesterday.
GM, which in 2013 was outsold by Volkswagen AG in China for the first time in nine years, has been reorganizing brands to give more focus to its global offerings. The Detroit-based carmaker said in December that it will pull the Chevrolet marque out of Europe, where GM is trying to restore profit at Opel and U.K. sister division Vauxhall, and that its Holden unit will stop producing cars in Australia.
“What GM is doing is to try make it clearer who’s responsible for what,” Erich Hauser, a London-based automotive analyst at International Strategy & Investment Group, said by phone. “By pulling Opel out of China, you just make it clear that Opel is a European brand, for the European market and with the aim of making money in Europe.”
Opel’s 22 Chinese dealers sold 4,365 vehicles in 2013. That compares with Buick’s 650 sales locations in the country and deliveries last year of 810,000. Opel’s European sales in the first two months gained 2.8 percent to 112,534, according to data from the ACEA industry group.
“This is a long overdue decision,” Karl-Thomas Neumann, Opel’s chief, said in a statement yesterday. “It would have cost hundreds of millions of euros to raise awareness of the Opel brand and to expand the distribution network. Buick, however, is one of the market leaders in China and we plan to intensify our future collaboration.”
GM sells more vehicles in China, the world’s biggest auto market, than in any other country. The U.S. company outlined plans a year ago to invest $11 billion with its joint ventures through 2016 in China on new plants, employees and products.
In Europe, GM wants to break even by mid-decade after losing more than $18 billion in the region since 1999. Opel is closing a plant in Bochum, the first auto factory to be shuttered in Germany since World War II. At the same time, the unit is refreshing its mid-sized Insignia car after adding the Adam city car and Mokka compact sport-utility vehicle.
GM will add a variant of the Insignia that in coming years will also be exported to the U.S. under the Buick badge, as well as another model that will be announced by the end of the year, the company said yesterday.
A sale of Opel to Canadian auto-parts producer Magna International Inc. and Russian partner OAO Sberbank was among options that GM considered as the U.S. company struggled to restore group profitability during the global recession in 2009. GM, which has controlled Opel since 1929, chose instead to keep the business and reorganize it to make it profitable.
To contact Bloomberg News staff for this story: Tian Ying in Beijing at firstname.lastname@example.org