GM's Opel turnaround plan to skirt big job cuts

Tue Jun 26, 2012 3:48pm EDT
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By Christiaan Hetzner and Ben Klayman

FRANKFURT/DETROIT (Reuters) - Opel's management will present a comprehensive turnaround plan to its board on Thursday that spans everything from model strategy through brand positioning to new export markets, while avoiding the delicate issue of job cuts in Germany.

Dan Akerson, the chief executive of parent General Motors (GM.N: Quote), 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 only possible if he closes at least one of the six car factories.

As a result, the endangered Bochum site, which management wants to close in 2017, will not see any investment spending under the plan. GM is also expected to shift some production of Opels - and possibly even Chevrolets - to Europe from Korea in order to improve capacity utilization and appease local workers.

Investors have grown impatient with Opel and its UK sister brand Vauxhall. GM has suffered underlying operating losses of roughly $3.5 billion over the past three years in Europe, where an ever-shrinking car market is expected to plumb new decade lows in 2012.

Since delicate negotiations with unions over a fresh round of restructuring might not be completed before November, company officials have been dampening hopes that Thursday's board meeting might provide a catalyst for the stock.

"What we've said - I've said it and others have said it - is you're going to see a continual series of actions over time," GM Chief Financial Officer and Opel board member Dan Ammann told Reuters on Monday. "As we have something to say, we'll say it."

The market may be unhappy with a stock languishing far below its IPO price, but analysts argue time must be granted to an industry that operates with notoriously long investment cycles.

"Increasingly, it would seem like the likelihood of a 'big bang' restructuring is low," said Jefferies analyst Peter Nesvold in a research note.   Continued...