GM Sees Financial Progress On European Market
|   Sunday, May 05, 2013
It seems that General Motors is making a steady progress in reforming its long-time money-losing unit in Europe, Opel, however there s still a much to do. That was the conclusion the analysts came up with after GM reported that its first-quarter pretax loss in Europe went down to 175 million dollars, a sizeable drop from the294 million dollars the previous year.

On a side note, GM is overtaking its rivals from Ford, which registered a pretax operating loss in Europe for the same quarter of 462 million dollars, up from the previous 149 million dollars.


GM managed to reduce 300 million dollars in costs while maintaining pricing on its vehicles. The results in Europe indicate that the cost cuts are actually offsetting the declining auto sales.

"The results that you see in the first quarter are a function of us executing" said Chief Financial Officer Dan Ammann.
Ammann said that GM is keeping to its target of breaking even in Europe's market by mid-decade, in spite of the fact that the region doesn't show any significant improvements.

"It's too soon to call a bottom in Europe." He continued "Obviously there are things that we control and we feel quite good about the progress we're making on those. There are things we don't control, such as the European macroeconomic environment."

200 million dollars of the total cost cuts were achieved through engineering and fixed cost reductions and a few other factors. However, Ammann said the cost savings in Europe will slow down we move further into 2013.
During the same quarter, revenue fell to 4.8 billion dollars from the 5.3 billion dollars seen during the same period in 2012. New models like the Opel Adam minicar and Mokka SUV helped GM slow the rate of declining sales in Europe. Overall, Opel sales went down 8 percent in the EU and EFTA markets, in a market that fell nearly 10 percent, according ACEA. Comparatively, Ford's sales fell by 20 percent during this time.

Christian Mayes, analyst with Edward Jones & Co. in St. Louis, said for Automotive News Europe regarding this situation: "They still have a ways to go to prove to investors that GM's approach in Europe has changed but some of the cost-cutting appears to be bearing initial fruit. It's just too early to say if this is a longer-term trend, or if there's more of a hard slog ahead for taking costs out of Europe."

If losses seem high now, they will continue rising as Ford officials believe the auto industry in Europe may become more stabilized towards the year's end or early 2014. Therefore, Ford expects to lose 2 billion dollars this year in Europe as a consequence, but also because it faces significant structural costs coming from the efforts made to improve its business.

Also, the carmaker will close the assembly plants in Genk, Belgium, and Southampton, England, as well as a stamping plant close to London. As a result, Ford has postponed the European launch of the Mondeo mid-sized car, a car built in Genk.
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