GM backs Opel as Europe chief Girsky pledges turnaround at carmaker
Steve Girsky's future at General Motors could depend on whether he acheives a successful reorganization of Opel.
FRANKFURT (Bloomberg) – For General Motors Co. Vice Chairman Steve Girsky, it's time to prove himself at the U.S. carmaker's European unit Opel/Vauxhall. As a GM director, Girsky opposed the sale of Opel in 2009 and now as head of European operations, the Wall Street veteran is taking direct responsibility for making that decision work, and he's committed to fixing the German carmaker.
"We're going to support this company and this brand, and we're going to give Opel tools to help them be successful," Girsky said in his first interview since taking the post. "You can't have a mindset that it's OK to lose a billion a year. That's the mindset we're trying to change."
The appointment in July as interim European chief puts Girsky at the center of the Detroit automaker's efforts to make its Opel/Vauxhall unit profitable after GM racked up $16.8 billion in losses in the region since 1999.
With European auto deliveries poised to drop this year to the lowest level since 1995, Opel's persistent losses have cast a shadow over GM's emergence from bankruptcy. "His future in General Motors depends on a successful reorganization of Opel," said Stefan Bratzel, director of the Center of Automotive Management in Bergisch Gladbach, Germany. "He can't pull himself out of it."
GM, restructured in a 2009 bankruptcy backed by $50 billion in U.S. funding, has shown little progress in stabilizing Opel. European losses before interest and taxes totaled $617 million in the first half, after a profit of $107 million a year earlier. GM also wrote down $590 million of goodwill in Europe in the first half.
Opel and its UK sister brand Vauxhall have suffered more than other manufacturers from the debt crisis. Deliveries in western Europe dropped 15 percent in the first half, more than double the 6.9 percent industrywide decline. Its market share shrank to 6.9 percent in the period from 12.6 percent in 1993. To reverse the slide, GM plans to expand Opel's lineup by introducing 23 models by 2016, including the Mokka compact crossover in October. The Adam mini car will be rolled out in 2013, followed by the four-seater Cascada convertible.
"Opel needs new innovative models to grow again and not compete just on price," said Tim Schuldt, an analyst with Equinet in Frankfurt. "With shrinking volumes, Opel has lost its competitiveness, especially compared to rivals such as VW."
Benefiting from its ability to share technology with brands including Audi and Skoda, Volkswagen Group increased market share in western Europe to 23.7 percent in the first half from 22.4 percent a year ago. The company last week introduced the seventh-generation version of the Golf hatchback, which competes with Opel's Astra.
VW generated an operating profit margin of 6.8 percent of sales in the second quarter, compared with 4.8 percent at GM, according to data compiled by Bloomberg. The German-based company's stock has jumped 23 percent this year, while GM has climbed 15 percent.
Girsky, 50, jumped in as Europe boss after GM ousted Karl-Friedrich Stracke, Opel's CEO, who had served as GM Europe president for less than seven months. Girsky now spends about three weeks a month in Germany as he searches for a permanent replacement to run Opel and GM's European operations and works on stemming Opel's losses.
The executive, who was appointed vice chairman in March 2010 and oversees GM's global strategy and business development, acknowledges that the automaker hasn't completely figured out the formula to fix Opel even after years of restructuring efforts, which included the 2010 closure of a factory in Antwerp, Belgium.
"The problems are: The brand is weak in its home market, Germany, and needs to be supported, and we're doing that," he said in the Sept. 7 interview near Opel's headquarters in Ruesselsheim. "The manufacturing operations are underutilized, so we take steps to do that. The product development organization is good, but it's about continuing to make improvements there and put lower-cost products on the road."
Girsky declined to discuss specifics of the planned turnaround. "We don't have all the answers yet, but we're doing a much better job of getting our arms around the situation," he said. "We need to get a cost structure that allows the company to break even at low levels of the market, just like we did in the U.S. Opel needs to ultimately earn its way."
That likely means more factory closures. GM hasn't allocated new models to a plant in Bochum, Germany, after the current generation of the Zafira minivan runs out in 2016. The plant, which has had its headcount pared to 3,100 people from a peak of more than 20,100 in 1979, reflects Opel's decline. The 150-year-old manufacturer, which has been part of GM since 1929, was once bigger than VW as it helped fuel Germany's post-war economic boom with affordable cars like the Kadett.
"The reorganization depends largely on GM's willingness to invest more money in Opel" to develop new models and improve parts sharing with other GM vehicles, said the Center of Automotive Management's Bratzel. "It's the last of their dry powder, and they have to make it count."
Girsky, who was appointed to GM's board to represent the UAW union's retiree-health trust, said he's committed to the turnaround because GM needs a strong European presence to keep pace with technology trends and because the German carmaker is so intertwined with the rest of GM, such as in its efforts in small-car development. The turnaround will be based on a model expansion, a new finance company in Europe and an alliance with PSA/Peugeot-Citroen that made GM the second-largest shareholder in Europe's No. 2 carmaker, he said.
His short-term focus, though, is to find a replacement to run the day-to-day operations. Girsky will keep his seat on Opel's board. "I hope I am the shortest serving interim president of GM Europe on record," said Girsky. "My role is to stabilize the ship in stormy weather, to lay the foundation for the new person to be successful."Contact Automotive News