GM to Spend 4 Billion Euros by 2016 on Europe Units’ TurnChristoph Rauwald
General Motors Co., the world’s second-largest carmaker, plans to invest 4 billion euros ($5.24 billion) in Europe operations through 2016 as it adds models to increase market share and restore profit in the region.
Spending will focus on developing 23 vehicles and 13 engines to reach a goal of breaking even in Europe by mid-decade, Chief Executive Officer Dan Akerson said at a press conference today following a meeting of the U.S. company’s board at the Opel division’s headquarters in Ruesselsheim, Germany.
“We’re more convinced than ever Opel will succeed” in its turnaround, Akerson said. “We are also more convinced than ever that GM must have a strong and successful presence throughout Europe, and especially here in Germany.”
GM’s European business, which consists primarily of Opel and its U.K. sister brand Vauxhall, has accumulated losses of $18 billion since 1999. Detroit-based GM’s earnings-revival strategy for the region includes the new models, partly in cooperation with French carmaker PSA Peugeot Citroen, as well as spending cuts through measures such as shutting Opel’s car factory in Bochum, Germany.
Opel and Vauxhall vehicles that have entered the market since late last year include the Adam city car, Mokka sport-utility vehicle and Cascada convertible.
Efforts by the GM brands to become profitable have been hampered by a European car market that’s set to shrink for a sixth consecutive year in 2013. Opel’s first-quarter sales in Germany fell 16 percent from a year earlier, outpacing an industrywide drop of 13 percent, with the contraction accelerating to 17 percent in March, according to the country’s Federal Motor Vehicle Office.
GM rose 3.1 percent to $28.37 at the close in New York. That pared the stock’s decline this year to 1.6 percent compared with an 11 percent jump in the Standard & Poor’s 500 Index .
The carmaker hired Karl-Thomas Neumann, formerly head of Chinese operations at German carmaker Volkswagen AG, to become head of the European operations and CEO of Opel in March.
“The investment by our parent company is a clear commitment” to the division’s success, Neumann said at the press conference. Opel’s turnaround plan is “based on conservative assumptions, not just on hope.”
The spending will include modernizing current production capacity, Henrik Hannemann, an Opel spokesman, said by phone.
Employees at Opel’s plant in Bochum, where a workforce of about 3,000 people makes the Zafira minivan, rejected a plan in March that would have included wage freezes in exchange for job guarantees while production would have been extended through 2016. In the absence of a labor deal, vehicle manufacturing at Bochum is scheduled to stop at the end of 2014.
The agreement that GM Europe reached with union leaders after nine months of talks was “fair and good,” and “we regret the vote against it,” GM Vice Chairman Steve Girsky, who is also chairman of Opel’s supervisory board, said at the press conference. “But we accept the decision and concentrate now on the perspective of Bochum.” The manufacturer “will take responsibility for the people and the region.”
Carmaking employees at Opel’s other four German factories, which don’t face shutdowns, agreed in March to forgo pay raises. The 6,000 workers at GM’s assembly plant near Zaragoza in northern Spain accepted a wage freeze for 2013 and 2014 on April 8 as part of a five-year contract.
GM’s workforce in Europe totaled about 37,000 employees at the end of December, including 20,000 in Germany, according to Opel’s Website.