GM to invest in Europe with new models to restore profit

GENERAL Motors (GM), the world’s second-largest vehicle maker, plans to invest ¤4bn in European operations to the end of 2016 as it adds vehicles to increase market share and restore profit in the region.

Spending will focus on developing 23 models and 13 engines to reach a goal of breaking even in Europe by mid-decade, CEO Dan Akerson said yesterday.

“We’re more convinced than ever Opel will succeed” in its turnaround, he 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 UK sister brand Vauxhall, has accumulated losses of $18bn since 1999. Detroit-based GM’s earnings-revival strategy includes the new models, partly in cooperation with French car maker PSA Peugeot Citroen, as well as spending cuts through measures such as shutting Opel’s car factory in Bochum, Germany.

Opel’s moves to become profitable have been hampered by a European car market that’s set to shrink for a sixth consecutive year. The division’s first-quarter sales in Germany dropped 16% from a year earlier, outpacing the industrywide decline of 13%, with the contraction accelerating to 17% last month, according to the Federal Motor Vehicle Office.

GM earlier this year hired KarlThomas Neumann, a former executive at Volkswagen, to become head of European operations. He took that position and became CEO of Opel last month.

“The investment by our parent company is a clear commitment” to the division’s success, Mr Neumann said at the press conference. Opel’s turnaround plan is “based on conservative assumptions, not just on hope”.

Employees at Opel’s plant in Bochum, where a workforce of about 3,000 people makes the Zafira minivan, rejected a plan last month that would have included wage freezes in exchange for job guarantees, while production would have been extended to end2016. In the absence of a labour deal, vehicle manufacturing at Bochum is scheduled to stop at the end of next year.

Car-making employees at Opel’s other four German factories, which do not face shutdowns, agreed last month to forego pay raises. The 6,000 workers at GM’s assembly plant near Zaragoza in northern Spain accepted a wage freeze for this year and next as part of a five-year contract. Bloomberg