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?? GM will invest $5.2 billion in Opel through 2016

GM will invest $5.2 billion in Opel through 2016
Staff report
Automotive News | April 10, 2013 – 8:52 am EST

MUNICH — General Motors Co. said it will invest 4 billion euros ($5.2 billion) in Opel by the end of 2016 to support new model launches, renewing its commitment to its money-losing European division.

“As a global automotive company, GM needs a strong presence in Europe — both in design and development as in manufacturing and sales,” GM CEO Dan Akerson said today in a statement.

“Opel is key to our success and enjoys the full support of its parent company,” he said.

GM’s board is holding its quarterly meeting today and tomorrow at Opel’s headquarters near Frankfurt as the carmaker looks at the efforts of its Opel unit to become profitable.

Opel’s European operations have lost $18 billion since 1999, including $1.8 billion last year.

Opel and UK sister brand Vauxhall are introducing new models to counter slumping sales including the Adam minicar, Mokka SUV and Cascada convertible. The unit said it plans to introduce 23 new or refreshed models and 13 new powertrains by 2016.

Opel’s 10-year plan, called DRIVE 2022, foresees a return to profitability by the middle of the decade.

Opel plans to eliminate $500 million in annual costs over three years, in addition to cutting $300 million in spending. The company is closing its factory in Bochum, Germany, which builds the Zafira minivan, and it eliminated 2,000 jobs in Europe last year

GM is aiming for a slight improvement in its European business this year, but not enough to avoid a 14th straight annual loss as car sales on the continent plunge to their lowest in almost two decades.

No sell off

Speculation has persisted that GM might shift Opel’s assets off its balance sheet into a joint venture with struggling alliance partner PSA/Peugeot-Citroen, or even sell Opel entirely.

When asked whether the 4 billion euro investment pledge guaranteed that Opel would remain a fully-owned unit of GM through 2016, Akerson declined to comment. But his top lieutenant, Opel Chairman Steve Girsky, told Reuters that speculation of a disposal was unfounded.

Opel’s turnaround is being led by Karl-Thomas Neumann, who was head of Volkswagen’s China operations and is a former CEO of German supplier Continental. Neumann became CEO of Opel and head of GM Europe on March 1.

Last year, sales of Opel/Vauxhall vehicles in EU and EFTA markets fell 15.6 percent to 834,790, according to industry organization ACEA.

Akerson and Neumann will visit German Chancellor Angela Merkel tomorrow, along with members of the GM board.

Capacity utilization

Meanwhile, Opel is currently running at 70 percent capacity in three-shift operation, Opel production chief Peter Thom said, dismissing press reports that it was far lower.

“In two-shift operation, utilization is around 100 percent,” he told Reuters today.

Given the high amount of fixed costs when manufacturing cars, the utilization of existing production capacity in factories is a crucial determining factor for earnings.

German press had recently reported Opel plants in Europe were running at half their capacity, far below the 80-85 percent generally needed for a carmaker to be profitable.

Reuters and Bloomberg contributed to this report

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