GM’s options for Opel may include a form of bankruptcy, analysts say image

General Motors’ vice chairman Steve Girsky has recently been appointed chairman of the Opel supervisory board, a sign that the Detroit-based automaker is very focused on solving its European subsidiary’s problems.

The future doesn’t look too bright for Opel though, as options for restructuring could include a form of bankruptcy, according to analysts and bankers. GM needs to cut Opel’s costs further and that means more jobs may be lost and some plants may be closed. Girsky, an investment banker, could look for new partners for Opel to share costs and may even consider selling the brand once the storm will pass.

The appointment of Girsky at the helm of Opel is a sign that GM takes the crisis in Europe very seriously. “It suggests that fixing Europe is a top priority for General Motors and they are shrinking the chain of command so that Detroit is on top of every detail,” Morgan Stanley analyst Adam Jonas was quoted as saying by Reuters.

Girsky said GM would focus on boosting profit margins and cutting costs by leveraging GM’s global scale. GM officials declined to discuss detail of its plans. GM also named Chief Financial Officer Dan Ammann and Tim Lee, the president of international operations, to the Opel board.
Opel lost $1.6 billion last year and $300 million in the third quarter of 2011. GM dropped its 2011 break-even target for Opel.

  • JulianMelford

    Read this from a german,

    let's say I have some insight into manufacturing industries..

    GM cars for europe are designed/engineered in europe, mainly at the research facility in Rüsselsheim, Germany, (of the 15,000 employees in the Rüsselsheim facility, 7000 are in R&D, rest is in production, even many of the new middle/small cars of the US brands have been developed there, also the Opel Ampera/Chevrolet Volt), originally all intellectual property/patents stayed with the different divisions and were lend to each other, now all R&D/Patents directly goes to the US headquarters, and is basically rent back to the foreign subsidiaries, before this new situation was created, Opel/Vauxhall had an annual surplus of roughly 680 million US-$ per year, just in liscence fees, now they run deficits on that massively, since all their IP *comes from USA*(legally, while it is really developed here)

    An accounting trick done for two reasons:
    – saving taxes (having additional costs which cause losses, instead of having profits)
    – less profitability on paper gives you a better leverage against your workforce