GM to focus on Europe with new models

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IOL mot pic dec12 Mary Barra 1

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Mary Barra is the first engineer to lead GM since Robert Stempel in the early 1990s.

With General Motors setting in motion big changes around the globe in recent days, analysts say the focus for new chief executive Mary Barra and her team will be making cars and trucks that prove popular enough to help end losses in Europe.

Over the past week, GM has announced it would pull the Chevrolet brand out of Europe by the end of 2015 to concentrate on Opel and stop making cars in Australia by 2017, to end losses in those regions. It also celebrated the long-awaited exit of the US Treasury as a shareholder.

The moves clear the decks for Barra, who became the first woman to lead a global automaker, and her reshuffled management team that will take over in January.

She’ll also be the first engineer to lead GM since Robert Stempel in the early 1990s.

AND THIS IS A GOOD THING BECAUSE... ?

Analysts are saying it’s a good sign because developing and building hot-selling vehicles is crucial to ending financial losses in Europe while also defending profit in the key US and Chinese markets.

Gabelli & Co analyst Brian Sponheimer said: “Her appointment seems to show the emphasis will be on products as opposed to strategies such as squeezing suppliers - and that's the right path.

“Quality and consistency of product will always be GM's No. 1 challenge,” he added. “Mary Barra needs to change the perception of GM in the eyes of potential customers.”

“That starts with the quality of the car.”

Outgoing CEO Dan Akerson is certainly not leaving the product cupboard bare; vehicles such as the Chevy Impala and Cadillac CTS sedans and redesigned Chevy Silverado and GMC Sierra pickup trucks are collecting awards and pulling in profits.

But a company is only as good as its next vehicle debut, so Barra must complete her current task as global product development chief - consolidating the number of platforms on which GM builds vehicles around the world as a way to cut costs.

UBS analyst Colin Langan explained: “GM has more complexity than a lot of other global automakers and they really need to harness their scale to get the full benefits.”

EUROPE, ASIA CONCERNS

Fixing Europe, where GM has lost $18 billion (R187 billion) over the last 12 years, is at the top of Barra's to-do list; analysts the decision to stop selling most Chevrolet model in Europe will help, as will exciting new Opels in the pipeline.

Opel has in the past suffered from having to build European cars on platforms more suited to the North American market, after former vice-chairman Bob Lutz insisted on Chevrolet and Opel sharing more parts.

Another money-losing region that needs help is the Asia region excluding China, GM is a leader in China but is struggling elsewhere in the region with lack of market share or, in the case of its South Korean manufacturing hub, rising labour costs.

REDUCING RELIANCE ON KOREA

GM earlier this year cut the third shift at its Korean plants, and industry research firm IHS says it’s likely to cut output in that country by nearly 20 percent in 2015 compared with this year. GM officials have been silent lately on plans for Korea, but executives have not hidden their desire to minimise reliance on the country in the future.

The decision to shut down production in Australia and the move to drop the Chevrolet brand in Europe will cost the company as much as $1.6 billion (R16.6 billion) but will help lower costs long-term and possibly relieve pressure on GM in Korea as Australian demand is met by the Korean plants.

Sponheimer said: “It's important for Mary Barra to start out with a relatively clean slate and announcing these changes in the past couple of weeks gives her an opportunity for her first six months to talk about what's positive at GM as opposed to coming in and announcing cuts.”

BREAKING DOWN FIEFDOMS

IHS managing director Michael Robinet said other challenges facing GM - and all automakers - include tackling the different regions' regulatory agendas, as well as continuing efforts to help their global operations work together more seamlessly.

David Cole, former chairman of the Centre for Automotive Research, said Barra and her top executives would need to “break down the fiefdoms” throughout the company globally, something Ford boss Alan Mulally pulled off in his turnaround of GM's US rival.

Morgan Stanley analyst Adam Jonas said on Wednesday investors' concerns about GM slipping back to the ‘old ways’ that led to its 2009 bankruptcy should be alleviated by the presence of so many ‘outsiders’ on the management team and board.

“The whole concept of team play is critical at GM.”

Among them are incoming president and current chief financial officer Dan Ammann, who joined GM from Wall Street, and incoming chairman Tim Solso, who saw sales double and shares rise nearly 10-fold in his 12 years as head of engine maker Cummins.

Jonas said concerns facing Barra and her team in GM's core North American market included rising capacity, deteriorating credit availability, falling prices for used vehicles and the weak Japanese yen.

New pickups and related large SUVs are hitting showrooms in growing numbers, pushing up profit, but Jeff Schuster, senior vice- president of forecasting at LMC Automotive, warned: “The mood of the market is ‘what have you done for me lately?', so keeping in touch with what buyers want with the next generation of models will be a challenge.” - Reuters


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