GM turns rehab focus to European operations

Profitability in North America has forced GM to begin tackling a turnaround of its European operations, where the challenges are entirely different.

In many ways, General Motors' North American operations are on their way out of the doldrums of the last 30 years; the automaker is making a profit and its sales are increasing. The same isn't quite true in Europe, where GM of Europe is losing market share and struggling with high operating costs.

GM of Europe is primarily focused on its German Opel unit and its Chevrolet brand - which mostly sells rebadged GM Daewoo products imported from Korea.

Unlike in North America, where GM's lineup was dated and uncompetitive a few years ago, Opel's products are hardly to blame - its Insignia was 2009's European Car of the Year and its Astra garnered third place in the 2010 competition. Instead, Opel faces difficult-to-reduce operating costs and mediocre sales. And GM of Europe's increased emphasis on importing cars from Korea aimed at growing Eastern European markets has helped drastically reduce product costs.

GM of Europe has watched its German market share slip to just 8 percent during the second quarter of 2010 - down from 8.8 percent in the fourth quarter of 2009. Its overall European share has actually climbed to 8.8 percent - up from 8.2 percent - mostly due to a strong increase in demand in the United Kingdom for the Chevrolet brand.

GM did manage to reduce Opel's losses during the second quarter, it said in a statement issued last week. Unfortunately, the savings came from massive job cuts and the closure of a Belgian assembly plant.

Analysts say that Opel's image has suffered during GM's downturn. The Detroit automaker briefly tried to sell its European division before reversing its plans and deciding to keep Opel - in large part for its engineering base.

"That didn't help the company here," GM Europe spokesman Stefan Weinmann told the Detroit News. "It's hard to say how much it cost us, but it did cost us."

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