General Motors’ goal of returning its European automotive operations to profitability this year after four years of losses is a “stretch” that will be difficult to achieve, chief executive officer Rick Wagoner said on Wednesday.
Reuters noted that GM in January set a target for earnings in Europe to range between break-even to a profit of $US100 million this year, compared with a loss of $504 million last year, but losses mounted in the first quarter, rising to $116 million for the period from $65 million in the year-ago quarter due to pricing pressures and costs for the ramp-up and launch of the new Astra small car.
The earnings goal “was a stretch from the beginning and after the first quarter it’s probably more of a stretch,” Wagoner told Reuters at the company’s annual meeting in Wilmington, Delaware.
GM officials reportedly have said the company is preparing a cost-cutting plan that will eliminate duplication between the Saab, Opel and Vauxhall divisions in Europe by sharing more work in manufacturing, technology, purchasing and other areas.
“We were trying to run 2-1/2 independent car companies on one continent, and at the same time, trying to coordinate the whole thing through GM Europe,” GM vice chairman Bob Lutz, who has overseen much of the planned changes in GM Europe, told Reuters on Wednesday.
The news agency noted that GM three years ago embarked on its “Project Olympia” restructuring of its European automotive operations which included cuts in capacity, jobs and other costs as part of a previous plan to return to profitability.
Lutz reportedly said that GM will announce its new plans before the end of the summer while other GM officials, who declined to be named, have said that the plan will not be like a typical restructuring, and will not include plant closures, although some jobs could be cut.
“We’ve got some work to do yet on the cost side in Europe, because the cost position in Germany is really challenging, given the way pricing (on new vehicles) is going in Europe,” Wagoner told Reuters, referring to increasing price competition in the European market.
The news agency said Lutz spent months in Europe this year preparing GM Europe for changes that he said will make it resemble GM’s North American operations in its structure. He has paved the way for Fritz Henderson, who took over as head of GM Europe this week after heading GM’s Asia-Pacific operations.
Sales of the Vectra mid-size car have been disappointing, but the automaker expects its new Astra small car will be a big hit, Wagoner told Reuters, adding: “We’ve been a little disappointed in sales of our other products … but the Astra looks like a very, very big hit, and boy do we need that badly.”