As incoming CEO Mary Barra prepares to take the reins at General Motors, her biggest challenge will be to accelerate the turnaround of the automaker’s European business.

Chronic loss-maker General Motors Europe will finally start making money next year thanks to cost cutting and restructuring, but sales will remain stagnant through the rest of the decade.

A new analyst report from Morgan Stanley estimates that European business represents a negative value of $11.5 billion on the company’s balance sheet. Morgan Stanley has also raised its estimate of the value of GM Europe by $4.5 billion, although that’s not as good as it sounds. The investment bank now reckons the company, comprising mainly German-based Opel and British brand Vauxhall, is worth a negative $11.5 billion, compared with its previous estimate of a negative $16 billion.

“GM Europe is a source of near-term earnings momentum, yet still a source of long-term risk,” Morgan Stanley’s Adam Jonas wrote in a research note. “We estimate GM Europe will generate $0.4 billion of combined profit over the next four years. We have improved our forecast for losses at GME further to $260 million in 2014 versus our estimate of $837 million in 2013, with a positive margin of one per cent for 2015 and 2016,” Jonas said in the report.

The report comes about a week before Barra is to succeed CEO Dan Akerson, who is retiring to help his wife, Karin, fight cancer.

When GM announced its leadership changes last month, the automaker said that Vice Chairman Steve Girsky would relinquish his role as the chairman of the automaker’s European turnaround efforts. But GM Europe President Karl-Thomas Neumann will stay in place.

The company announced plans last month to shrink its partnership with Peugeot Citroën and sell off its 7% stake in the French automaker after Peugeot tightened ties with Chinese automaker Dongfeng Motor.

GM also decided to withdraw Chevrolet from Europe to place more firepower behind its Germany-based Opel brand.


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