General Motors’ best option is to sell its money-losing Opel unit in Europe, Morgan Stanley analyst Adam Jonas said on Thursday.
As losses in Europe don’t seem to be nearing an end, the Wall Street analyst believes that the best move for GM would be to offload Opel. Jonas estimates that selling Opel could cost GM up to $13 billion, including upfront restructuring, an equity contribution to a buyer and funding Opel’s pension obligations.
„One of the worst things in the auto industry is owning a cash-burning, resource-consuming business. We believe the time has come for GM to find a new home for Opel,” Jonas wrote in a research note. In its turn, General Motors said it remains committed to Opel.
“Despite the tough environment for the automotive business in Europe, we believe we have an opportunity to turn the Opel/Vauxhall business around and bring it back to long-term profitability,” GM spokesman Jim Cain replied.
GM’s European unit lost $16 billion over the last 12 years, a figure that could get even bigger within the next 12 years, Jonas says. „Opel is the single biggest threat to GM’s long-term financial health and sustainability. We’d rather see GM with a 3 percent share in Europe generating a profit than an 8 percent market share in Europe generating massive losses,” wrote Jonas, who compared the situation to that when Daimler sold Chrysler in 2007 to Cerberus to get rid of losses.