Analysis: GM moves to boost profit in Asia, Europe long overdue

Fri Dec 6, 2013 2:44pm EST
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By Ben Klayman

DETROIT (Reuters) - General Motors Co's (GM.N: Quote) decision to pull the plug on Chevrolet in Europe is one of several calculated moves the U.S. automaker appears to be making around the world that analysts and investors say are long overdue if the automaker wants to boost profits in line with its rivals.

GM said on Thursday that by the end of 2015 it will drop its mainstream Chevrolet brand in Europe, except for certain vehicles, like the Corvette sports car.

It made the decision, which the board approved in October according to a person familiar with the plans, so it could instead focus on rebuilding its Opel brand after failing to garner significant market share for Chevy in the region.

Meanwhile, Australian media reported on Friday that GM has decided to end its manufacturing operations there as early as 2016. While GM has not confirmed those plans, a source told Reuters that GM Korea, which stands to lose Europe as an export market for the Chevy vehicles it builds, may in turn boost exports to Australia.

One banker said the decision to cut Chevy in Europe was 10 years late, but at least the company finally made the right move. The banker, who asked not to be identified discussing a sensitive topic, said GM still has about half the operating earnings of global rivals Toyota Motor Corp (7203.T: Quote) and Volkswagen AG (VOWG_p.DE: Quote) even though their sales are similar.

"GM is under-earning relative to its size," said the banker, who described GM's current moves as finishing unfinished business from its 2009 bankruptcy reorganization. "Maybe it's them finally deciding that they have to restructure the company in a much more comprehensive way."

Morgan Stanley analyst Adam Jonas called the moves part of a more coordinated approach at a Detroit-based company that now seems more willing to upset some of its constituents - dealers in Europe and employees in Korea - in its quest to improve its long-term financial health.

"Maybe this is new GM," he said. "The old GM had this culture of very powerful fiefdoms that could hide around the company's lack of internal financial transparency and controls, and fight wars with each other and Detroit.   Continued...

The sign at a General Motors Chevrolet dealer is seen behind a Chevrolet pickup truck in Golden, Colorado September 4, 2013. REUTERS/Rick Wilking