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GM backs Opel as new chief on hot seat pledges turnaround

Admin12.09.2012г 

Bloomberg News (Frankfurt) For General Motors Co. (GM) Vice Chairman Steve Girsky, it's sink-or-swim time.

As a GM director, the former president of Centerbridge Industrial Partners LLC opposed the sale of the Opel auto brand in 2009. After being appointed to head GM's European operations in July, the Wall Street veteran is taking direct responsibility for making that decision work, and he's committed to fixing the German carmaker.

"We're going to support this company and this brand, and we're going to give Opel tools to help them be successful," Girsky said in his first interview since taking the post. "You can't have a mindset that it's OK to lose a billion a year. That's the mindset we're trying to change."

The appointment as interim European chief puts Girsky at the center of the Detroit automaker's efforts to make its Opel unit profitable after GM racked up $16.8 billion in losses in the region since 1999. With European auto deliveries poised to drop this year to the lowest level since 1995, Opel's persistent losses have cast a shadow over GM's emergence from bankruptcy.

"His future in General Motors depends on a successful reorganization of Opel," said Stefan Bratzel, director of the Center of Automotive Management in Bergisch Gladbach, Germany. "He can't pull himself out of it."

GM, restructured in a 2009 bankruptcy backed by $50 billion in U.S. funding, has shown little progress in stabilizing Opel. European losses before interest and taxes totaled $617 million in the first half, after a profit of $107 million a year earlier. GM also wrote down $590 million of goodwill in Europe in the first half.

Slumping Share

Opel and its U.K. sister brand Vauxhall have suffered more than other manufacturers from the debt crisis. Deliveries in Western Europe dropped 15 percent in the first half, more than double the 6.9 percent industrywide decline. Its market share shrank to 6.9 percent in the period from 12.6 percent in 1993.

To reverse the slide, GM plans to expand Opel's lineup by introducing 23 models by 2016, including the Mokka compact crossover in October. The Adam mini car will be rolled out in 2013, followed by the four-seater Cascada convertible.

"Opel needs new innovative models to grow again and not compete just on price," said Tim Schuldt, an analyst with Equinet in Frankfurt. "With shrinking volumes, Opel has lost its competitiveness, especially compared to rivals such as VW."

Benefiting from its ability to share technology with brands including Audi and Skoda, Volkswagen AG (VOW) increased market share in Western Europe to 23.7 percent in the first half from 22.4 percent a year ago. The company last week introduced a new version of the Golf hatchback, which competes with Opel's Astra.

VW Edge

VW generated an operating profit margin of 6.8 percent of sales in the second quarter, compared with 4.8 percent at GM, according to data compiled by Bloomberg. The Wolfsburg, Germany- based company's stock has jumped 23 percent this year, while GM has climbed 15 percent.