GM seen accelerating Opel restructuring as sales plunge

The financial crisis in Europe is adding new urgency to General Motors Co.'s attempt to turn around its money-burning Opel unit.

GM, which has already trimmed its European work force by 5,800, is considering a variety of additional steps to stem the losses. The company is looking to find greater cost savings between Opel and Chevrolet operations in Europe, Tim Lee, president of GM's international operations, told reporters this month at the Detroit auto show. GM might move some work from Korea to Europe to boost revenue and use assets there, according to three people familiar with the matter.

In addition, Stefan Bauknecht, a Frankfurt-based fund manager for Deutsche Bank AG investment vehicle DWS, said this is the time for GM to work more aggressively with unions to lower costs.

"The negative swing in the European automotive market increases the pressure for both the management and trade unions to find a compromise," said Bauknecht. DWS holds $5 million GM shares, according to Bloomberg figures, while Deutsche Bank as a whole holds $316 million of GM stock.

Chief Executive Officer Dan Akerson has lost more than $2.34 billion on GM's European operations since pushing to call off the sale of the Opel brand in late 2009. Plans to reach break-even on an operating basis were scrapped in November as the continent's economy teetered.

GM's European sales dropped 15 percent in December, led by an 18 percent plunge at Opel, according to data from the Brussels-based European Automobile Manufacturers' Association. Opel's share of the market in Western Europe fell to 7.3 percent last year from 12.6 percent in 1993.

Opel, founded in 1862 by Adam Opel, started out making sewing machines and bicycles before going on to produce cars, including its "Laubfrosch," or tree frog, model. GM purchased 80 percent of Opel in 1929 after asset prices plunged worldwide. Two years later, GM bought the rest of Opel, establishing itself as the biggest carmaker in Europe through the 1930s.

Models such as the Kadett helped place Opel at the forefront of the post-war German economic miracle. Opel was finally overtaken by Wolfsburg, Germany-based Volkswagen in 1998 and has continued to lose ground ever since, according to ACEA figures, as a lack of investment in new models gradually eroded its market share and image.

Akerson, before becoming chairman and CEO, was one of the GM board members who agitated to keep Opel and call off the sale in November 2009 to Magna International Inc. and Moscow-based OAO Sberbank. Akerson joined GM's board after the automaker's U.S.-backed bankruptcy earlier that year and became CEO in September 2010.

The restructuring in Europe by post-bankruptcy GM was going according to plan, executives told reporters as recently as the Frankfurt auto show in September. Two months later, GM said it couldn't meet its target of breaking even before restructuring costs. Europe operations lost $580 million before interest and taxes from January through September, the Detroit-based automaker said Nov. 9 in a statement.

"What we are looking at is an increasingly challenged economic environment going forward, with a lot of uncertainty," Dan Ammann, GM chief financial officer, told analysts. "We've got to get the break-even point lower, get the revenue higher, in order to be profitable in that kind of market environment."

GM had $900 million in restructuring and early-retirement costs in Europe and cut 5,800 jobs there through Sept. 30, GM said in the regulatory filing. Those efforts included closing an assembly plant in Antwerp, Belgium, the company said.

The company said it expects an additional $300 million in costs by the end of this year to complete the programs, which will affect 1,600 more employees. GM won't rule out cutting more jobs or closing additional plants, Ammann has said.

GM fell 1.4 percent to $24.37 at the close in New York. The shares rose 20 percent this year.