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European losses not acceptable, says GM boss
Akerson pulls out the whip on GM Europe as division president Nick Reilly walks
11 Nov 2011
GENERAL Motors chief executive officer Dan Akerson has voiced his frustration with the financial performance of GM’s European operations, describing the long-running losses sustained by the problem child as “not sustainable and not acceptable”.
Revealed just two days after GM Europe president Nick Reilly announced he would retire in March, the division’s third quarter result showed a $US300 million ($A295m) loss, dragging down what would have otherwise been an improved performance from the world’s biggest car-maker.
Instead, GM’s quarterly global profit before interest and tax (EBIT) dipped from $US2.3 billion in the third quarter of 2010 to $US2.2 billion this year.
The Detroit-based giant also warned that its results would likely remain flat over the last quarter of 2011, with hard-won gains stalled by Europe’s economic woes that continue to reverberate around the world.
It also indicated that its target of a break-even result in Europe this year was unlikely to be achieved.
GM came perilously close to selling off its European operation, including Opel and Vauxhall, at the height of the global financial crisis when it was desperate to be rid of the loss-making enterprise.
Instead, the company elected to have one more try to lift the division, with English-born Mr Reilly returning to old stamping ground to head the recovery.
Left: GM Europe president Nick Reilly.
The continued economic problems of Europe, including the critical Greek and Italian debt situations, have stymied the efforts, and now 61-year-old Mr Reilly has decided to retire and hand over the presidency to German-born Karl Stracke on January 1.
GM’s global quarterly sales revenues rose 7.8 per cent year on year, to $36.7 billion, thanks mainly to GM’s improved sales in North America and a continued strong performance in China.
Vehicle sales improved 9.0 per cent to 2.2 million units, taking GM’s sales in the first three quarters of 2011 to almost 6.8 million vehicles and putting it on track to regain its global market crown from earthquake-pummeled Toyota, whose 5.77 million sales for the nine months put it in third place behind GM and Volkswagen (6.16 million).
Mr Akerson described GM’s performance as solid, thanks to growth in both sales volumes and revenue in North America and China, where it has market leadership.
“But solid isn’t good enough, even in a tough global economy,” he said.
“Our overall results underscore the work we have to do to leverage our scale and further improve our margins everywhere we do business.”
Mr Akerson singled out Europe and South America for his harshest criticism, saying: “Results there are not sustainable and not acceptable.
“We will continue to work on reducing the breakeven levels in those regions to ensure profitable and sustainable growth going forward.
“We must and shall continue to work for new ways to reduce complexity and contain cost in all regions of the world.
“At the same time, we will continue to better leverage our scale to take advantage of expected global growth and improving our margins.”
In North America, GM reported a $US2.2 billion quarterly profit, up $100 million on the same period of 2010.
GM International Operations – which includes China – produced a profit of $400 million, although that was down $100 million on the third quarter of 2010, mainly because GM has ramped up engineering efforts in the world’s largest market, impacting costs.
GM Europe’s $300 million loss came despite an improvement of $300 million over last year’s $600 million disaster.
GM South America reported breakeven results, down from a $200 million profit in the third quarter of 2010.
GM ended the quarter with $38.8 billion in cash from its automotive operations.
Mr Akerson signalled further cost cutting throughout the company as it continues its recovery from near bankruptcy and chapter 11 reform in 2009.
“The next level of performance will come as we systematically eliminate complexity and cost throughout the organisation,” he said.
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