* Seeks to quash speculation of a sale of Opel
* Investment to fund 23 model launches through 2016
* GM also fixing Opel's low fuel efficiency
* Shares gain as plants more efficient than believed
By Christiaan Hetzner
RUESSELSHEIM, Germany, April 10 General Motors
pledged to invest 4 billion euros ($5.2 billion) in
loss-making Opel by the end of 2016 to support new model
launches, renewing a commitment to its ailing European brand.
GM is aiming for a slight improvement in its European
business this year, but not anywhere near enough to avoid a 14th
straight annual loss as car sales on the continent plunge to
their lowest in almost two decades.
The company's adjusted operating loss in Europe widened to
$1.8 billion last year from $700 million in 2011 and it only
expects to achieve profitability in the middle of the decade.
"Overall, GM's engine is sputtering in Europe. This new
product overhaul that they're doing at Opel is being financed
from U.S. profits and would not be possible otherwise," said
Edward Jones analyst Christian Mayes.
GM Chief Executive Dan Akerson said the investment would
help it increase market share by funding the development and
launch of 23 new models and 13 new engines through 2016.
"We are more convinced than ever that GM must have a strong
and successful presence throughout Europe and especially here in
Germany." Akerson told reporters at Opel's Ruesselsheim
headquarters after a meeting of GM's board of directors.
Speculation has persisted that GM might shift Opel's assets
off its balance sheet into a joint venture with struggling
French ally PSA Peugeot Citroen, or even sell Opel,
which also includes British sister brand Vauxhall, entirely.
"Opel is key to our success and enjoys the full support of
its parent company," Akerson added.
When asked specifically whether the 4 billion euro
investment pledge guaranteed that Opel would remain a
fully-owned unit of GM through 2016, the GM CEO declined to
But Opel Chairman Steve Girsky told Reuters that speculation
of a disposal was unfounded: "That's an old story."
GM's board met in Ruesselsheim to examine progress in the
brand's turnaround plan dubbed "DRIVE!2022" and the difficulties
faced by Europe's auto industry.
Akerson will stay in Germany tomorrow to meet Chancellor
Angela Merkel, whose centre-right government is seeking a fresh
mandate in general elections scheduled for September.
PEERS SUFFER TOO
Part of the problem is Opel's underutilised car plants.
Carmakers have high fixed costs in the form of manufacturing
machinery that depreciates over time, so profits largely depend
on how efficient the plants are at churning out cars.
Opel's factories are running at around 70 percent capacity
on the basis of three shifts of workers assembling cars per day,
Opel production chief Peter Thom told Reuters.
This is lower than the 80-85 percent generally seen in the
industry as necessary to break even, but Edward Jones analyst
Mayes said the news helped to boost GM's stock on Wednesday
since it was higher than many expected.
Shares in GM gained 2.3 percent as of 1652 GMT,
outperforming more moderate gains in the broader S&P 500 index
New product launches should further improve Opel's bottom
line. After the debut of the Adam city car and the Mokka
subcompact sport utility vehicle (SUV), it is entering a third
market segment with the roll-out of its all-new Cascada
cabriolet on April 20.
Just as crucially, GM is also addressing criticism of Opel's
relatively low fuel efficiency by renewing 80 percent of the
brand's engine portfolio by 2016, including an all-new family of
1.6 litre diesels developed entirely in-house.
Although GM is struggling to reform its Opel business, its
problems are anything but unique.
Fiat Chief Executive Sergio Marchionne said on
Tuesday the company's losses in Europe could be worse than
expected this year. According to industry estimates, western
Europe's car market shrank by roughly 10 percent in the first
On Wednesday, German premium carmaker Daimler
said it may cut its 2013 profit forecast this month given the
alarming rate of decline of Europe's car market.
In 2012, volumes hit lows not seen in 17