June 28, 2012 / 8:45 PM / 6 years ago

Opel supervisory board approves turnaround plan

FRANKFURT/CHICAGO (Reuters) - Opel, the ailing European arm of General Motors Co (GM.N), took a key step toward returning the brand to long-term profitability after its supervisory board voted in favor of a midterm business plan that included “massive” investments in its model range.

A logo of Opel is pictured at the Opel plant in Bochum March 23, 2012. REUTERS/Ina Fassbender

“The plan approved today paves the way for a strong future for Opel. GM stands behind Opel and supports management and labor,” said GM Vice Chairman Stephen Girsky in a statement on Thursday.

Girsky chairs Opel’s board, which is split evenly between representatives from GM and elected delegates from the 40,000-plus workers at Opel and its UK sister brand, Vauxhall.

The business plan for the four years through the end of 2016 entails “massive” investments in the product range, a redesigned brand strategy, an increase in exports, cuts in material, engineering and development costs as well as added savings from its alliance with France’s Peugeot Citroen (PEUP.PA).

No concrete details were provided, nor did Opel say when it expected to return to the black, however. Its underlying operating loss narrowed last year to $747 million from $1.95 billion in 2010.

GM Chief Executive Dan Akerson said at an event in Chicago on Thursday that it was premature to say how soon the U.S. automaker could get its European operations back to profitability. But he added, “if you look out five years, I would be disappointed if we couldn’t get to profitability.”

Speaking to an audience of business executives, Akerson said he was “cautiously optimistic” about the progress in Europe, where GM remains committed to Opel.

“We’ve lost $14 billion in the last 12 years. It’s got to stop,” he said of Europe. “We’re looking at some sort of agreement with our unions that would allow us to consolidate.”

Akerson wants to stem the constant flow of red ink at Opel by shrinking its fixed-cost base and running each plant at maximum capacity on a three-shift basis - something analysts say is possible only if he closes at least one of the six car factories.

Akerson said Thursday that GM had not formulated any charges to restructure the money-losing European unit, but would provide more details once a definitive deal with union workers is reached.

“The support of GM shows just how important European engineering and the European sites of Opel and Vauxhall are for the group,” said Opel’s top labor leader, Wolfgang Schaefer-Klug.

Strident union opposition to plant closures has forced Opel to take a two-track approach to its restructuring - putting the plan to a boardroom vote while negotiating separately over staff cuts in Germany that likely would take effect only after the last year of the plan.

Reporting by Christiaan Hetzner in Frankfurt and Ben Klayman in Chicago; editing by Matthew Lewis

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