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GM Plans Major Overhaul Of Business in Europe

Author: Stephen Power
Publication: The Wall Street Journal

Date: June 17, 2004

Abstract: Seeking to end years of losses in Europe, General Motors Corp. is expected to announce a major reorganization of its European operations tomorrow to give more power to top officials in Zurich and reduce the autonomy of its Saab, Vauxhall and Opel units... Though GM said earlier this year that its European operations would break even or earn a profit of as much as $100 million (€82.2 million) this year, the company's chief financial officer, John Devine, told analysts earlier this week that the company now expects its European operations to post a loss again this year.

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Seeking to end years of losses in Europe, General Motors Corp. is expected to announce a major reorganization of its European operations tomorrow to give more power to top officials in Zurich and reduce the autonomy of its Saab, Vauxhall and Opel units.

Though GM said earlier this year that its European operations would break even or earn a profit of as much as $100 million (€82.2 million) this year, the company's chief financial officer, John Devine, told analysts earlier this week that the company now expects its European operations to post a loss again this year.

Mr. Devine didn't say how big a loss the company expects in Europe, but he said despite the loss, GM remains on track to meet its financial goals this year, thanks to strength in its GMAC financing arm.

So far this year, GM's European sales are down 0.8% and its market share has fallen to 9.5% from 9.9%.

The planned changes are the latest indication of how deeply rooted GM officials in Detroit believe the company's problems are in Europe.

GM Europe hasn't been profitable since 1999. In the first quarter of this year, GM reported a loss in Europe of $116 million, compared with $65 million in the year-earlier period. It blamed price competition, higher foreign-exchange losses and costs tied to the launch of the Opel Astra, GM's answer to Volkswagen AG's Golf. For 2003, GM Europe posted a loss of $286 million.

As part of the reorganization, the sales and marketing chiefs at Opel, Vauxhall and Saab will report to Jonathan Browning, GM Europe's sales and marketing chief. Until now, they have reported to the heads of each brand and to Mr. Browning, a confusing chain of command that longtime GM observers say has contributed to waste and duplication of effort.

Similarly, the heads of production and product development at Saab, Vauxhall and Opel will report directly to Carl-Peter Forster, who will become GM Europe's chief operating officer after serving as Opel's chief executive since 2001.

GM's vice chairman for product development, Robert Lutz, complained in an interview last month that engineers at the company's luxury Saab unit develop separate wiring harnesses, air conditioning and suspension systems on vehicles essentially based on the same architecture as certain vehicles made at Opel.

It isn't clear how the changes will affect the current managing director of Vauxhall, Kevin Wale, or the CEO of Saab, Peter Augustsson. Although GM hasn't formally announced the changes, some details -- such as Mr. Forster's expected promotion to chief operating officer -- have begun to trickle out in recent days. We have said all along that we will make changes to the organizational structure, and we'll make those announcements in the near future, a GM Europe spokesman said yesterday

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GM says won't close plants in European revamp

Author: Nicola Leske
Publication: Reuters English News Service

Date: June 17, 2004

Abstract: General Motors Corp will seek to save costs by building more cars on the same basic platform, but will not close plants or cut jobs as part of a reorganisation of its European operations due to be unveiled on Friday, the company said.

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FRANKFURT, June 17 (Reuters) - General Motors Corp will seek to save costs by building more cars on the same basic platform, but will not close plants or cut jobs as part of a reorganisation of its European operations due to be unveiled on Friday, the company said.

Absolutely nothing in this direction is planned, a GM (NYSE:GM - News) Europe spokesman said on Thursday of media speculation that the world's biggest car maker may shut factories to help return to profit in Europe's fiercely competitive market.

On the contrary, we are looking to see how we can get even more output of the Opel Astra or the Zafira because the Astra is doing very well and we need more capacity, he added.

GM aims to develop vehicles of a similar class globally so that they can share a basic set of components such as brakes or steering systems. The plan is to roughly double the number of models based on the same architecture to seven or eight.

When we have done this -- no matter if in Europe, Asia or America -- then we have more flexibility on the production side, the spokesman said.

GM officials have made clear that top management in Detroit wants to group the company's European operations more closely and efficiently to eliminate duplication between the Saab, Opel and Vauxhall divisions.

German-based unit Adam Opel, for instance, will in future develop the parent company's mid-sized vehicles, Opel Chief Executive Carl-Peter Forster told a German newspaper last month.

As part of the reshuffle, Forster will move to GM³s European headquarters in Zurich and report to Fritz Henderson, industry sources have told Reuters.

TURNAROUND JOB

Henderson became head of GM Europe this month after running GM operations in the Asia-Pacific region.

He inherited the goal, abandoned this week, of returning the company's European automotive operations to profit this year after four years of losses.

GM Europe's loss widened in the first quarter to $116 million from $65 million a year earlier amid intense pricing pressure and the cost of launching its new Astra small car.

The company launched Project Olympia three years ago to cut European capacity, jobs and other costs to return to profit. Officials who declined to be named have said the new plan will not involve plant closures but could eliminate some jobs.

GM has 11 plants in eight European countries and employs around 63,000 people. It has cut production capacity in Europe by 28 percent from 1999 levels but acknowledges it has to take a tougher line on cutting costs and boosting revenue.

At a recent investor conference, they were painting a very cautious and decidedly negative picture of the European market, said one analyst who asked not to be named.

Expectations are going to remain pretty negative there unless they take some action, probably on the supply side. One bright spot for GM comes from joint ventures with Fiat (Milan:FIA.MI - News) that are wringing out savings through cooperation on purchasing and power trains, the analyst said.

But GM may have to shift production of small cars to take advantage of spare capacity that its GM Daewoo division has in low-cost central and eastern Europe, he added. (Additional reporting by Michael Shields)

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Vauxhall loses autonomy

Author: David Teather
Publication: The Guardian (UK)

Date: June 18, 2004

Abstract: Vauxhall management will be stripped of some autonomy as General Motors struggles to put its European car making business back in profit, according to a report in the US.

Full Text:
Vauxhall management will be stripped of some autonomy as General Motors struggles to put its European car making business back in profit, according to a report in the US.

The reshuffle follows the admission by chief financial officer John Devine that GM is unlikely to pull its European operation into the black this year as it had hoped.

The European division, which includes Opel and Saab, has not been profitable since 1999 and last year lost $286m (¡156m). In the most recent quarter, it saw widening losses of $116m against $65m a year earlier.

The Wall Street Journal said the marketing and sales chiefs of the three marques will report directly to Jonathan Browning, GM Europe's sales and marketing chief, instead of to the head of each brand.

GM, expected to make the announcement today, would only say: We've said all along we need to make changes to the way we run the business in Europe. We need a much more integrated approach
 

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General Motors Corp will seek to save costs by building more cars on the same basic platform, but will not close plants or cut jobs as part of a reorganisation of its European operations due to be unveiled on Friday, the company said.[/b]
+ Jobs won't go at Trollhatton for the time being
- Now EXTREMELY unlikely to see any radical product development from Saab.
 
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