November 21, 2011 / 6:57 PM / 7 years ago

GM moves to speed up Opel restructuring

(Reuters) - General Motors Co (GM.N) moved on Monday to speed up the restructuring of its money-losing Opel brand, naming its vice chairman and two other senior executives to lead the unit’s board.

Under heavy pressure to justify its massive $52 billion taxpayer-funded bailout from 2009 and bolster a stock that has fallen far below its $33 market debut price, Detroit needs to find an answer for its European operations, analysts said.

GM said on Monday Vice Chairman Stephen Girsky, a board member of Opel with 25 years of experience in the auto industry, will replace Nick Reilly immediately at the head of the German unit’s oversight body.

GM also named GM International Operations President Tim Lee and Chief Financial Officer Dan Ammann as members of Opel’s supervisory board, which oversees the management team led by Opel Chief Executive Officer Karl-Friedrich Stracke.

“GM’s initial attempts to achieve a sustainable break-even for Opel are not working thus far,” Morgan Stanley analyst Adam Jonas said. “Recent statements by management suggest more aggressive actions, such as IG Metall contract renegotiation or Opel reorganization, are possible options.

“We view the situation at Opel as unsustainable,” he added in a research note that was published before the Girsky news.

After emerging from bankruptcy in 2009, GM dropped plans to sell Opel to a consortium led by Magna International Inc (MG.TO) and Sberbank Rossii OAO (SBER.MM) following months of negotiation. Instead it launched a restructuring to get the unit, which lost $1.6 billion last year, back on track.

Even two months ago, GM executives were saying Opel’s restructuring was on track and denying reports the automaker was eyeing a sale of Opel.

Girsky repeated on Monday that GM was committed to Opel.

“To fully leverage the brand’s potential, we will continue to work on optimizing the cost structure, improve margins and make use of economies of scale within the group,” he said in a statement.

The Ruesselsheim-based maker of the Opel Insignia sedan, marketed in the U.S. as the Buick Regal, is being squeezed between lower-cost Asian competitors like Hyundai Motor Co Ltd (005380.KS) and premium carmakers moving downmarket like Volkswagen AG’s (VOWG_p.DE) Audi.

In the last two months, fears of the eurozone debt crisis have led consumers in the region to pull back on spending. That led GM to abandon its target for break-even results for Opel for the full year in Europe, an economy Chief Executive Dan Akerson described as a “morass.”

On November 7, GM announced it would change its top executive in Europe.

Two days later, GM posted a lower third-quarter profit on losses in Europe and offered a disappointing outlook that raised doubts about the speed of its turnaround two years after emerging from bankruptcy.

The biggest drag came from Opel, which burned a $300 million loss into its income statement.

At the time, Ammann had said nothing was “off the table” in restructuring GM’s European operations, including closing plants.

Akerson, who voted two years ago against keeping Opel, said on November 11 that the unit needed to lower its break-even point further.

“You can’t have a unit as important as Opel is to General Motors chronically unprofitable,” he told reporters. “It’s not sustainable and it’s not good for the company.”

Morgan Stanley’s Jonas said wording of that kind was used by Germany’s Daimler AG (DAIGn.DE) in early 2007 when referring to its Chrysler division before the sale of that business to private equity firm Cerberus Capital Management.

In his research note about Opel, entitled “Auf Wiedersehen” — German for good-bye — Jonas said the meltdown in Europe could allow GM to reopen its contract with the IG Metall union. Another option could be a “contained bankruptcy” for Opel.

Unions and politicians in Europe have resisted plant closures, stranding the industry with excess capacity.

Opel labor leader Klaus Franz said on November 9 he was “astonished” by the threat of a potential plant closing, saying GM’s current labor deal barred closures and factory job cuts through 2014. He declined to comment on Monday.

GM also said 48-year old Peter Thom, currently GM China’s manufacturing boss, will return to Opel as its new head of production, effective March 2012.

Thom will be responsible for extracting further efficiency gains from a manufacturing network based largely in high-cost Germany, including the Eisenach plant he once ran.

Reporting by Ben Klayman in Detroit and Christiaan Hetzner in Frankfurt; Editing by Dan Lalor, David Cowell and Gerald E. McCormick

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