GENEVA (Reuters) - General Motors Co’s (GM.N) alliance with French peer PSA Peugeot Citroen (PEUP.PA) is just one part of GM’s plan to fix its loss-making Opel unit, Vice Chairman Steve Girsky said, though he declined to say what would come next in the plan.
Girsky, a former Wall Street banker, told reporters at the Geneva Auto Show on Tuesday he knew investors, consumers and Opel workers did not like uncertainty but they just had to believe him when he said GM had a viable plan for Europe.
He said the alliance GM signed last week with Peugeot was “an additional tool to the toolkit in Europe.”
GM agreed to pay 304 million euros for a 7 percent stake in Peugeot, the French carmaker said on Tuesday, as part of an alliance designed to save the companies at least $2 billion over the next five years.
GM had previously valued the purchase at approximately 320 million euros based on earlier market prices.
“We can’t tell you what our play is in Europe,” said Girsky. “We will tell you when it plays out over the next period of months and years ... I don’t see the play in Europe showing up in one big bang.”
Girsky declined to say when the next step would be made in the overall GM profit plan for Europe, where production capacity is estimated to be at least 20 percent higher than needed to keep companies profitable in a tight and weakening market.
“Excess capacity is not a GM issue, it’s an industry issue,” Girsky said.
“We’ve taken steps in the past ... we are working with all of our constituents to improve the profitability of our European business up and down the income statement. Improve the revenue and improve the fixed-cost structure to improve the break-even levels. We will tell you more when we know more.”
He also declined to say how much the world’s biggest automaker would lose in Europe in 2012. GM’s Detroit rival Ford Motor Co (F.N) said it would lose between $500 million and $600 million, due mainly to an 8.5 percent fall in industry-wide European auto sales this year.
Girsky would not comment on whether such a fall in sales would mean GM would lose more money this year than the $747 million it lost in 2011. GM has lost money in Europe for the last 12 years.
“It’s not just investors who hate uncertainty,” said Girsky. “It’s the workers, it’s the employees. People are working really hard on this.”
Peugeot offered its shares at a deep discount on Tuesday in a 1 billion euro ($1.3 billion) rights issue to fund the alliance with GM.
Meanwhile, BMW (BMWG.DE) said on Tuesday it was in talks with GM on future technologies such as fuel cells and may extend cooperation with Peugeot on gasoline engines.
At the Geneva show, BMW Chief Executive Officer Norbert Reithofer said he “can imagine” joining forces with a cooperation partner in North America. He declined to specify what areas the talks were focusing on.
“Peugeot also has several partners for cooperation,” the CEO said. “That’s our strategy, too.”
Graphic on Europe car sales r.reuters.com/cyz86s
Slideshow from Geneva Auto Show: here
Girsky said GM was committed to Opel in Europe, including its Vauxhall brand in Britain. “Any talk that we are not committed to Europe should be off the table,” he said.
“There’s uncertainty in the economic environment across Europe. That is what we have to live with and what we have to work our way through. Working together, we think we can get this done.”
GM last year named company veteran Karl-Friedrich Stracke as head of operations in Europe, added senior GM executives to the Opel board and lowered bonus pay for GM executives in Europe.
“We’re trying to change the calculus here,” said Girsky. “We know that running the same play the way we’ve been running it won’t work, and we’re trying to do it differently. This (PSA alliance) is an example of it and you are going to see more.”
Girsky said GM and Opel had taken out as much capacity as they can without closing plants. GM has an agreement with the German union IG Metall not to cut jobs through 2014.
Michelle Krebs, analyst with Edmunds.com, said Girsky was taking a risk that investors and consumers would trust GM has a viable plan to fix Opel without offering specifics. Also, she said, the alliance with Peugeot does not take out any of the overcapacity that plagues most European automakers.
“Is this what the American taxpayers want?” said Krebs, who is at the Geneva Auto Show. “It’s not solving their problem, which is stemming the losses, and they are basically asking us to trust that the payoff will come in the future.”
Girsky, who is overseeing the reshaping of Opel, said the first product on a shared platform would begin production in 2016, but the initial concrete signs of efficiencies in the alliance would emerge later this year.
“In the second half of this year, you will start to see some of the product programs and the purchasing initiatives that we do will start to be developed,” Girsky said.
Girsky said the Peugeot-GM alliance would work for the companies outside Europe too, primarily in emerging markets. He was not specific but agreed that Brazil and India could be places where shared-platform vehicles may be sold, and said cars made for emerging markets would differ from those for Europe.
In India, automakers often make less expensive vehicles with fewer amenities.
As for closing plants, Girsky said GM and Peugeot would make their own decisions on how to manage their production, but restated that the alliance would not cause any plants to close.
Girsky also said it was possible the European market would be depressed for several years. Economic weakness is just one of the reasons it will take GM longer to restructure toward profitability in Europe than it did in North America, where it was helped by government-sponsored bailout and bankruptcy.
“Bankruptcy created a big bang in the U.S. In Europe, it will play out as the new product programs are launched.”
Additional Reporting by Christiaan Hetzner; Editing by David Holmes and Helen Massy-Beresford