September 14, 2012 / 5:18 PM / 6 years ago

Too soon to know whether Europe is stabilizing: GM CFO

(Reuters) - It is not clear whether the weak European automotive market is stabilizing, but executives in the industry are talking more than ever about reducing capacity to match lower demand in the region, a top General Motors Co (GM.N) official said on Friday.

The logo of Opel is seen at a plant in Bochum August 23, 2012. REUTERS/Ina Fassbender

GM’s Opel unit in Europe has lost $16 billion over the past 12 years and the U.S. automaker has pushed for change at the business. That has included the ouster of the unit’s chief executive, as well as reducing the number of temporary and contract employees, and cutting the hours of workers at some plants.

However, the drop in industry sales brought on by the euro zone debt crisis has only put more pressure on GM.

“The issues in Europe are not just issues of the General Motors business in Europe,” GM Chief Financial officer Dan Ammann said at a Morgan Stanley conference in New York. He added that it is a problem that plagues all of the European industry.

Ammann said it was too soon to know whether the European auto market has stabilized or might even get worse.

“Too soon to make a call,” he said, adding it depended on the market or country.

The Morgan Stanley analyst hosting GM at the event, Adam Jonas, issued a research note last week in which he said it was time for GM to cut ties with Opel. GM has said it has no plans to do that.

Auto industry executives are talking more than ever about the need to reduce capacity in the region to match the lower demand, Ammann said. But he added that closing plants takes time as they are tied so closely to longer product life cycles.

“We see a greater level of at least discussion activity around that today than we’ve seen in any period in recent history,” he said at the conference, which was webcast.

“People are coming to grips with the fact that there has to be, over time, a fundamental adjustment to capacity or, miraculously, somehow volumes have to improve, which I think in the current economic environment, no one is placing a bet on right now.”

Chrysler Group Chief Executive Sergio Marchionne agreed, but said German automakers, who have weathered the slowdown in better shape, remain resistant to a broader intervention to help the sector.

“I have advocated in the past that the EU collectively address this (over capacity) issue,” he told reporters in Detroit on Friday. “Unfortunately, my call for a coordinated intervention has fallen on deaf ears, surely by my German colleagues who do not see the need.

Marchionne said Europe’s over capacity issue “needs to be managed and managed aggressively.”

GM’s alliance with French automaker PSA Peugeot Citroen (PEUP.PA) “remains essentially on track,” Ammann said.

Despite GM’s struggles in Europe, Ammann said the U.S. automaker remains committed to rolling out new products, citing the “critical” launches later this year of the Opel Mokka small SUV and Opel Adam minicar. He said GM’s product portfolio in the region “is in really strong shape.”

As for GM’s mainstream Chevrolet brand in Europe, Ammann repeated that it draws different buyers than Opel. He also said Chevy will increase its market share in the region this year and there were opportunities to continue that trend going forward.

In answer to a question, Ammann declined to reveal whether the Chevy brand is profitable in Europe. He would only say GM sees “a good financial opportunity for Chevrolet in Europe.”

In the Chinese auto market, Ammann said pricing pressure is spreading from the local players to the upper end. While acknowledging a slowdown in sales growth in the world’s largest auto market, where GM is the market share leader, he added: “I wouldn’t say that it’s alarming us at this point in time.”

Marchionne agreed: “I don’t see any desperate signs of an economic reversal in China.”

Reporting By Ben Klayman and Bernie Woodall in Detroit. Editing by Dave Zimmerman and Andre Grenon

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