General Motors is under pressure to cut costs further in Europe, where sales incentives are rising, many consumers are refusing to paying higher prices and the carmaker has been losing money, the CEO has said.
“I think realistically there’s a lot of work to do on the cost side in Europe,” chief executive Rick Wagoner told a Morgan Stanley conference, according to Reuters.
Wagoner reportedly said GM had justified raising prices on its cars in Europe by adding more features, but that business model is now in question because many consumers are unwilling to pay higher prices, while the heavy incentives common in North America, which have depressed earnings, are now spreading to Europe, partly due to structural issues.
“People are saying, in many cases, ‘prices are high enough.’ So it is going to put a lot more pressure on cost reduction,” he said, according to Reuters.
The news agency said Wagoner’s warnings of further cost cuts in Europe come as the carmaker reviews its business there and prepares for major changes in the European automotive operations, which last year posted a net loss of $US909 million before income taxes and other items.
Reuters said that, despite turnaround programmes at GM Europe and Saab, losses in Europe have continued and have been steeper than forecast.
Wagoner reportedly said the growing strength of Japanese and Korean carmakers in Europe, where they are less established then in the United States, and currency issues are adding to the competitive pressures in Europe.
In addition to more cost cuts, GM needs to drive its revenues higher in Europe, and new vehicles like the [newly redesigned] Opel Astra car, for which GM holds 60,000 advance orders, are key to that objective, Wagoner said, according to Reuters.
