1 Carmaker to "Turn a Corner" in Europe?
Dec 22nd 2012 8:00AM
Updated Dec 22nd 2012 12:42PM
Prolonged economic trouble and uncertainty in Europe has hurt consumers and, in turn, automobile companies. Most carmakers are sustaining huge losses in Europe, made up for only by strong performances elsewhere in the world. Ford , for example, announced earlier this year that it would lose $500 million in Europe in 2012 but later revised that figure to a $1 billion loss, and then a $1.5 billion loss. General Motors has also been bleeding cash, losing $750 million last year. GM's problems, however, actually predate the recession. GM's European division, called Opel, hasn't turned an annual profit since 1999. Now, however, GM Europe resident Stephen Girsky believes the troubled division is set to make a turnaround.
In an interview with The Wall Street Journal Deutschland, Girsky asserted the company had made good progress and was on track to turn the corner on more than a decade of losses. Since many carmakers, including GM and Ford, expect demand to weaken further in 2013, profitability will mostly come from productivity gains and cutting costs out of the businesses.
Girsky pointed to several cost-cutting initiatives at the European division, but in each case it seems to be somewhat behind the ball compared with Ford. GM first announced in June that its Bochum plant, one of four German factories and employing around 3,400 workers, will close permanently in 2016. GM confirmed this decision, marking the first auto plant closure in Europe in decades.
Other automakers followed suit, with French firm Peugeot planning to close a plant in France and Italian Fiat , which now owns Chrysler, slashing production at a Polish plant. It was Ford that went the furthest, however, announcing the closure of three plants in the U.K. and Belgium, cutting up to 6,000 jobs in the process.
Girsky also affirmed the success of Opel's partnership with Peugeot, saying that "we've made important progress in our alliance" with Peugeot" and that "both partners have the possibility of realizing projects they wouldn't have been able to see through alone." Opel and Peugeot join their efforts in logistics, purchasing, and product development. They are developing three vehicle platforms jointly, which will become the base of several different finished vehicles, a move meant to streamline design and manufacture costs through gained efficiency and scale.
Even here, though, the plan looks a lot like Ford's "One Ford" initiative, which aims to leverage just five common vehicle platforms to account for 75% of sales. GM is simply following the leader here, and if Girsky believes GM Europe's efforts constitute "turning the corner," then Ford looks to be further ahead.
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The article 1 Carmaker to "Turn a Corner" in Europe? originally appeared on Fool.com.Fool contributor Daniel Ferry owns shares of General Motors and has a synthetic long position on Ford. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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