Girsky must make deep cuts at Opel
Key tasks: Costs, pricing, successor
Steve Girsky: 'Mr Fix-It' has his hands full.
When General Motors last had a profitable year in Europe, the company was in the midst of a $600 million global project to ensure Y2K readiness. Steve Girsky was an auto analyst on Wall Street.
Now Girsky is the one tasked with fixing the company's business in Europe, a goal that has eluded many GM lifers during the 12 years that $12.4 billion in losses have piled up here.
Just two weeks after GM's European division, Opel/Vauxhall, approved a restructuring plan, GM removed Karl-Friedrich Stracke and put Girsky in charge July 12.
Stracke, president of GM Europe since January and head of Opel since April 2011, will take on special assignments for GM CEO Dan Akerson, who flew to Germany a day before the shake-up. Girsky was named acting head of GM's European operations.
Here's what Girsky faces: In a European culture geared toward job protection, Opel needs to cut capacity, lower production costs and find significant cost savings from GM's alliance with PSA/Peugeot-Citroen.
He also must figure out a price strategy that doesn't overlap with Chevrolet.
And then there's the matter of finding a permanent Opel CEO -- a search likely to be complicated by management turbulence that has displaced three CEOs in the past three years.
An Opel insider said Girsky, 50, will remain in the position for "several months" until a permanent replacement is named. Internal and external candidates are being considered. Girsky has been chairman of Opel's supervisory board since November.
The move -- which, according to published reports, surprised even some high-ranking Opel officials when GM announced it last Thursday -- shows how impatient Akerson and Girsky have become as Europe continues to blight the carmaker's earnings reports. GM management thought Stracke's plan wasn't forceful enough and Stracke didn't fully understand Detroit's urgency to fix Europe, a company source said. He was more keen to keep German unions quiet.
The shake-up cements Girsky, who relentlessly criticized GM's slow-moving bureaucracy in two decades with the investment bank Morgan Stanley, as Akerson's go-to problem-solver and a formidable candidate to succeed him eventually.
GM has now removed Opel's CEO three times in less than three years, a period in which the division's strategy has been hard to pin down. Nick Reilly, Stracke's predecessor, tried to take Opel's lineup upscale, but under Stracke the brand reversed course to emphasize value.
"He certainly is an ideal candidate to fill that post, at least in the interim," Mike Wall, an analyst with IHS Automotive, said of Girsky. "He's about as well steeped in the issues that GM is facing as anybody in the organization. Having him in there for now is probably the best thing they can do because the concerns facing GM in Europe right now are significant."
GM spokesman Greg Martin said the company has begun to search for a successor to Stracke, 56.
Martin said Girsky, who also has responsibility for GM's global product planning, purchasing and corporate strategy, does not intend to run GM Europe permanently.
GM, which publicly described Stracke's departure as a resignation, said the Opel board plans to meet soon to appoint an interim chairman.
The timing of Stracke's exit -- after the second quarter ended but before GM reports the results Aug. 2 -- prompted concerns among analysts and investors that the company's European losses have widened considerably. Shares of GM fell to $19.23, the lowest point of the year, soon after the announcement.
"Our sense is that GM's European restructuring has not progressed as quickly as investors and the board would like, and that a management shake-up will hopefully rejuvenate the process across all avenues, including capacity reductions/consolidation, labor negotiations, dealer closures, etc.," Peter Nesvold, an analyst with Jefferies and Co., wrote in a report.
"While we remain positive on the outlook in North America," Nesvold wrote, "the continuing losses in Europe combined with the uncertainty of a management change are likely to weigh on the stock for the foreseeable future."
GM has not generated a profit in Europe since 1999, losing a total of $12.4 billion since then, Nesvold said. Ford Motor Co., in contrast, has earned $2.95 billion there in the past eight years, with only 2011 being unprofitable in that stretch. But Ford recently issued a warning about a poor second-quarter performance in Europe, and other automakers are struggling as well amid the region's troubled economy.
As head of the Opel board, Girsky already has been overseeing the division's latest restructuring effort. His plan includes shutting a plant in Germany in 2016; GM's labor agreements prevent closures before then, hampering the company's ability to cut costs quickly.
In the four years through 2016, Opel plans "massive" investments in the product range, an increase in exports, cuts in material, engineering and development costs as well as added savings from GM's alliance with PSA.
Girsky, dubbed "GM's Mr Fix-It" in a Wall Street Journal headline this year, is now in a position to prove he was right to argue in 2009 that GM should keep Opel because of its strategic importance to the overall company. GM had made a deal to sell the division to Magna International, a Canadian parts maker, but Girsky and Akerson helped persuade other board members to cancel the sale.
At the University of Pennsylvania's Wharton Leadership Conference in June, Girsky said Opel needs to become more closely integrated with the rest of GM to reverse its fortunes.
"We're going to do what it takes to fix this," Girsky said in an audio recording of a question-and-answer session posted on the Wharton School's Web site. "And it's important. Opel's a critical part of GM, and frankly we need to make them more a part of GM."
He continued: "Opel's a 6 percent share company trying to compete with a 20 percent share company, namely Volkswagen. How does a 6 percent share company compete with a 20? Well, one, they rely on the scale, the resources of the global organization. And two, they rely on partners, where they can, to fill in holes where they can. And that's the strategy we're executing. Opel can't be an island unto itself. We have big resources in the global GM organization, and Opel needs to leverage that to be successful."
Luca Ciferri contributed to this report
You can reach Nick Bunkley at email@example.com. -- Follow Nick on