GM Chevy Leaves Europe, Expands Opel
GM has decided to cut back on its Chevy brand in Europe as its Opel and Vauxhall divisions expand in the region. GM will halt deliveries by the end of 2015, Vice Chairman Steve Girsky said during a conference call.
Reorganization costs from the shift will total $700 million to $1 billion. The move ends an effort by Detroit-based automaker to use its American brand to make up for losses in Europe generated by its other divisions. “Unacceptable” financial performance at the brand in the region contributed to the pullout, Girsky said.
The revamp “eliminates some competition from one of their own brands,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. “But we need to keep a sense of proportion: Chevrolet has never been very successful in Europe, and there’s no guarantee Opel will automatically get its market share.”
GM rose as much as 1.6 percent and was trading up 0.3 percent at $38.84 at 10:39 a.m. in New York. The stock has risen 35 percent this year, valuing the company at $54 billion.
The manufacturer ranks fourth in group European car sales, behind Volkswagen AG, PSA Peugeot Citroen (UG) and Renault SA. (RNO) GM’s losses in the region since 1999 have exceeded $18 billion, including a $214 million deficit in the third quarter.
The automaker began selling Chevrolet models in Europe in 2005, putting the U.S. brand’s nameplate on low-cost vehicles made by the Daewoo division in South Korea. GM came close to selling Ruesselsheim, Germany-based Opel, a business it has controlled since 1929, to Canadian vehicle-parts maker Magna International Inc. in 2009 amid moves to emerge from bankruptcy.
“It was a strategic mistake from the beginning to re-badge cheap Korean cars with the Chevrolet name that’s associated with large U.S. road cruisers,” said Frank Schwope, a Hanover, Germany-based analyst at Nord LB.
The European reorganization is another “mistake,” as GM “could have pushed Opel more up-market and established Chevrolet as a budget brand,” Schwope said. “Volkswagen successfully manages four similar marques in Europe — VW, Skoda, Audi and Seat — yet GM isn’t able to make one profitable in the region.”
Chevrolet’s registrations in the region amounted to 172,100 vehicles last year, down 2.5 percent from the 2011 figure, with the brand accounting for 1.4 percent of industry-wide registrations, according to the Brussels-based European Automobile Manufacturers Association. That compares with 834,800 deliveries in 2012 by Opel and its sister U.K. division Vauxhall.
