* GM Europe wins back Russia from GM Asia starting January
* Move could help GM Europe return to profit sooner
* Victory for GM Europe head Neumann
* Boost for European Opel and Vauxhall brands and workforce
By Christiaan Hetzner
FRANKFURT, Oct 18 General Motors has
decided to put its Russian operations back under the control of
its European wing - a victory for GM Europe's new president and
a signal of support for a workforce that has endured massive job
cuts in the hunt for profitability.
GM made a turnaround of its European business a top priority
after racking up around $18 billion in losses over the past 12
years, and is investing billions more despite calls from Morgan
Stanley to sell Opel and its UK sister Vauxhall at virtually any
Russia is Opel's only major growth region - a lucrative
geography where margin-eroding discounts are far less common
than in a western European market set to plumb lows not seen
From January, General Motors International Operations
(GMIO), based in Shanghai, China, will hand the business back to
GM Europe (GME) after three years.
Not only will Opel's own sales in Russia be consolidated at
GME, so will those of Chevrolet, which sells more than twice as
many cars in Russia, and GM's premium brand, Cadillac.
"This will allow GM Europe to emerge more quickly from the
red," said Ferdinand Dudenhoeffer, head of the CAR automotive
research institute at the University of Duisburg-Essen.
He said this suggested that new Opel chief executive and GME
president Karl-Thomas Neumann, who came in March from Volkswagen
, had won out in a battle for influence within GM.
The move could also help Neumann to shore up support among
his European workforce, which has endured tens of thousands of
job cuts since 2000 - more than half of all staff - and will
suffer the third closure of a car plant come 2014.
"Profits that so far were booked in Asia-Pacific are now
ending up in Europe. They are creating the appearance of
progress with the restructuring of Opel," said Dudenhoeffer.
FROM BOOM TO BUST
Five years ago, Opel was an up and coming brand in Russia,
selling almost 100,000 cars - twice as many as Volkswagen's VW
But the bankruptcy of the GM group in 2009 and the aborted
sale of Opel to a consortium that included Russia's state-owned
Sberbank sent sales that year crashing by two-thirds.
GME then surrendered responsibility for the Russian market
to GMIO in 2010. The loss was heavily criticised at the time by
Opel's labour leaders, who felt GME management had given up a
key profit centre in exchange for personal advancement.
In the meantime, VW has overtaken Opel in Russia, moving
nearly 165,000 cars last year and outselling it two to one.
However, GM's Chevrolet sold over 205,000 cars while Cadillac
managed around 2,000.
"This is the right decision at the right time," Neumann
said, noting that Russia was still the third-largest market for
Opel/Vauxhall after the UK and Germany.
"All forecasts indicate that Russia will become the biggest
European car market. Opel has a strong image in Russia and we
want to significantly expand our share of the market."
Opel has hampered its chances of growth by largely staying
out of major markets such as China and instead confining its
operations to Europe, home to all of its factories, so as not to
compete with other GM brands.
For example, GM's Buick builds the Opel Insignia in China,
badges it as a Buick Regal, and books the profits, leaving Opel
with only niche products to sell, such as its Astra GTC coupe.
As a result, Opel sold just 4,500 vehicles last year in the
world's largest car market.
A main reason why other mass-market rivals such as
Volkswagen are profitable is their ability to compensate for
weak European business with rising sales in emerging markets
such as China, Brazil and India.
By comparison, Opel pulled out of Australia in August,
leaving it with only a few, small non-European export markets
such as Chile, Singapore and the United Arab Emirates.