GM8217;s Opel facing uncertain future

It8217;s not the biggest money maker we have,GM Vice Chairman Steve Girsky said on Wednesday. I8217;m not in denial on that.

GM Chief Executive Dan Akerson,who voted against keeping Opel in a board meeting in 2009,is now charged with saving the automaker. The dilemma is to squeeze profits out of Opel and ensure it has the products to fend off rivals,while still allowing Chevrolet to take the lead as GM8217;s mass-market champion around the world.

Akerson said in 2009 that Europe was a market of national champion automakers 8212; Volkswagen AG in Germany,Fiat in Italy and Renault in France 8212; and pan-European luxury brands like BMW and Daimler AG8217;s Mercedes,according to a person familiar with Akerson8217;s thinking.

After emerging from bankruptcy in 2009,GM dropped plans to sell Opel to Canada8217;s Magna International Inc following months of negotiation,and launched a restructuring to get the unit,which lost 1.6 billion last year,back on track.

In June,however,reports surfaced that GM was again eyeing a sale,something Akerson did not deny until late July. GM executives have said Opel8217;s restructuring is on track and the business remains a key part of their global strategy.

They had to think about selling it in 2009 to help the parent company survive,said a banker active in the automotive sector who asked not to be identified. Today,Opel is still suffering from the lack of a vision of how to move forward.

NOT FLIPPED OVERBOARD

Girsky emphasized Opel8217;s importance to GM at a Credit Suisse conference,saying it was critical to GM8217;s scale and technology.

People tend to view Opel as this thing you can just flip overboard and that8217;s sort of not the way we view it,he said. We view it as something that8217;s integral to GM.

GM can point to positive signs for Opel and its European operations,which in the second quarter posted its first profit since the bankruptcy with 102 million in earnings before interest and taxes. That included 100 million in restructuring costs.

GM Europe,which includes U.K. sister brand Vauxhall,expects to break even this year and show a profit in 2012.

Through June,Opel/Vauxhall8217;s sales in the European Union rose more than 2 percent,while the overall market fell by a similar amount,according to the European auto industry association ACEA. Market share rose to 7.6 percent,or third in the region,and shifts were added at Ruesselsheim and plants in England and Poland.

Opel will provide a glimpse of its future at the Frankfurt auto show on Tuesday,unveiling a concept two-seat electric car inspired by the Opel Ampera plug-in electric car scheduled to go on sale this fall.

In addition,Opel is looking to export to more markets,having added Israel this year with plans to enter Chile and Australia in the next few months,as well as boost sales in the world8217;s largest auto market in China.

However,GM executives have been clear where Opel stands in its lineup,calling it a regional brand supporting the global aims of the mainstream Chevy and luxury Cadillac brands.

Opel executives and workers chafe at being limited largely to Europe,saying if the Detroit executives would only get out of the way the brand could grow around the world. That Us versus Them mentality is still apparent at times in the way GM executives frame the challenge.

Opel will be successful,and I would argue only successful,if they leverage what we have to offer at GM,said Girsky,adding Opel8217;s products need to be consistent with GM8217;s.

DEVIL AND THE DEEP BLUE SEA

Opel is revamping its designs and adding technology in its cars to give them more cache,but it will be a tough sell in a crowded market,analysts said.

I can8217;t see that being the magic bullet for increasing their sales volumes and profitability,IHS Automotive senior analyst Tim Urquhart said of Opel moving up market. Opel is caught between the devil and the deep blue sea.

Further squeezing Opel is GM8217;s desire to make Chevy even stronger globally,boosting that brand8217;s share of the company8217;s global sales to 65 percent in 2016 from about 61 percent last year,while Opel stays flat at 13 percent. CEO Akerson has said GM8217;s long-term plan is to build Chevys in Europe.

Urquhart suggested a sale,partnership or dumping the brand remain possibilities,but GM would likely give Opel at least 10 years before deciding.

Other analysts and bankers said dumping the brand would cost GM sales in the region,while rebuilding Opel8217;s image could take decades based on VW8217;s turnaround of its Audi luxury brand.

GM could turn to a Chinese automaker but that would be risky,exposing GM8217;s intellectual property and technology to a potential rival.

I don8217;t think you allow the Chinese to be your partner,Jefferies analyst Peter Nesvold said. You8217;re kind of letting the fox in the hen house.

Opel workers remain nervous. Unions in Bochum,home to an Opel plant considered the most likely to close should more cuts be made,plan to hold a press conference on Monday to air their concerns.

If the Zafira doesn8217;t do well,they could shut the plant and resume building it in Ruesselsheim within four weeks,Irfan Drescher,a former Bochum worker,said of the seven-seat family hauler. That8217;s why I was happy when my application for a job here in the development center was approved.