WSJ 2nd UPDATE: GM CEO: Europe May Hurt GM's 2012 Profit
06/28/2012| 06:51pm US/Eastern
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(Adds details on European restructuring and fate of Bochum plant, in second and third paragraphs.)
By Benjamin Kesling and Christoph Rauwald
CHICAGO--General Motors Co.'s (GM) profitability for the rest of the year risks being dragged down by the worsening situation in Europe, Chief Executive Dan Akerson said Thursday.
He made the comments after GM's loss-making European Opel and Vauxhall brands approved a restructuring plan that aims to turn around the business as fast as possible. That plan, which won approval from Opel's labor chief, includes investments in new products, unspecified cost cuts and a revamped sales strategy.
It doesn't, however, include the planned closure of GM's German plant in Bochum after 2016. Closing the Bochum plant would mark the first major plant closure in the country since World War II. GM said earlier this month it aims to phase out production in Bochum, but final details still have to be discussed with labor unions.
GM has lost more than $14 billion in Europe since 1999 and is laboring to stanch losses as troubles overseas eats profits and keeps investors away.
"I'm a little bit worried about the second half, because you can see softness in Europe," Mr. Akerson said, speaking at an event. "It's tough in Europe right now. My mom used to say your reward is in heaven, I can't wait that long, but we're doing the best we can."
The Opel restructuring plan approved Thursday gave no new details of concrete measures or a time frame for turning around the unit as demand for cars in the region continues to contract.
Vice Chairman Steve Girsky, in a statement, said the plan "paves the way for a strong future of Opel," but did not expand on how the company would address the issue of overcapacity.
The auto maker, which for a time weighed closing two plants, now aims to get its underused European operations running efficiently by shedding just Bochum, people familiar with the matter said. It aims to fill the remaining gap through additional job cuts and by producing non-Opel vehicles, most likely from its joint venture with French auto maker PSA Peugeot Citroen, these people said. GM and Peugeot have yet to strike a deal to produce vehicles jointly.
The European car industry suffers from chronic overcapacity and poor demand, making it difficult for many mass-market manufacturers to operate profitably in the region.
Unlike in North America, these auto makers, including France's PSA Peugeot Citroen SA (>> PEUGEOT) and Renault SA (>> RENAULT), avoided closing factories in the 2008 to 2009 downturn despite hefty losses, mainly due to political and union resistance to painful cutbacks.
Car makers, especially those with a large exposure to sales in Europe and little presence in more dynamic markets abroad, are now contemplating more drastic action to stop mounting losses.
-Write to Ben Kesling at benjamin.kesling@wsj.com.
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