Tue, Jul 17, 2012 - Page 15 News List

General Motors seen step away from giving up on Europe’s Opel for good

Reuters, FRANKFURT, Germany

Just hours after General Motors (GM) abruptly fired Karl-Friedrich Stracke as chief executive of car-maker Opel last week, industry observers were already beginning to ask whether it was time to start writing the troubled European unit’s epitaph. Since GM emerged from bankruptcy three years ago, Opel has racked up US$3.5 billion in underlying losses thanks to an ever shrinking European auto market, a bloated fixed cost base and an image that GM has helped bring low.

In the past four weeks, however, management and labor had made promising signs of progress, approving a mid-term business plan and agreeing to end production at a German factory in 2017 as the basis for restructuring negotiations. Morgan Stanley analysts even began shifting their attention to the problems faced by Ford in Europe.

All for nothing as everything appears to be in the air again, including killing off the brand, even if company sources argue one person’s departure changes little. GM and Opel have not commented publicly on the reasons for Stracke’s removal, other than to say he would “take on special assignments” at GM.

One industry observer believed GM CEO Dan Akerson was following the advice of former-GE boss and management guru Jack Welch, who once said that if a company did not measure up, the only options were to “fix it, sell it, or close it.”

“This will be the last such attempt under Akerson and since GM couldn’t sell Opel last time, they will just wind it down if they can’t fix it,” said Ferdinand Dudenhoeffer, a professor at the Centre for Automotive Research (CAR) in Duisburg, Germany.

Armin Schild, a regional boss of the IG Metall union, which negotiates on behalf of Opel’s blue-collar workers, and one of Opel’s own supervisory board members, has already warned that far more is at stake in upcoming negotiations than simply swapping job guarantees for wage concessions.

If talks fail, “the overarching message then is there is no agreement with IG Metall and that is possibly the beginning of the end of the company,” Schild told reporters late last month.

While Stracke’s sacking may please investors on Wall Street demanding quick results, observers in Germany have criticized the timing as myopic and characteristic of GM executives who lack commitment and strategic vision.

“Opel’s problems won’t be solved by managing it on the basis of quarterly results. Either the owner adopts a long term strategy and sticks to that plan or it looks pretty damn bleak for the brand in the future,” said Andreas Halin, managing partner of Global Mind Executive Search Consultants in Frankfurt and an expert on corporate management.

GM has a history of abrupt U-turns that have damaged its credibility. In September 2009, GM’s board agreed to hand control of Opel over to a consortium led by automotive parts maker Magna in a deal brokered by Chancellor Angela Merkel, only to change its mind weeks later.

Now GM vice chairman and Opel supervisory board chief Stephen Girsky has removed Stracke less than a month after the business plan was approved and a key logistics deal was struck with France’s Peugeot.

“The worst is that GM frequently changes course. Until yesterday the strategy was to guarantee jobs through 2016, today it is making cuts and closing plants as quickly as possible,” Dudenhoeffer said.

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