GM to Largely Pull Chevrolet from Europe

GM to largely pull Chevrolet from Europe (AP)

General Motors Co. (GM) plans to largely withdraw its Chevrolet brand from Europe from the beginning of 2016, focusing more sharply on its main Opel and Vauxhall brands. The stock price of GM rose modestly after the announcement, even though the U.S. market as a whole traded downward. If GM’s stock price stays elevated, it could let the U.S. government earn a bit of additional money when it sells its remaining shares of GM stock after bailing out the automaker several years ago.

Today’s announcement indicates Chevrolet will no longer have a “mainstream presence” in Europe. The move will reduce corporate costs as sales on the continent are challenging due to the “difficult economic situation” there. Much like the elimination of GM brands such as Pontiac, Saturn and Oldsmobile in the United States, the scaling back of marketing Chevrolet in Europe will reduce the “market complexity” of maintaining several brands in the region. GM has continued to lose money in Europe, where automakers’ sales have been hampered by persistent economic weakness, even as the company’s performance elsewhere improves. Chevrolet will still offer “select iconic vehicles” such as the Corvette in Europe and will retain a broad presence in Russia.

GM expects the decision will result in net charges of between $700 million and $1 billion, primarily in the current quarter and continuing through the first half of next year. Those charges include asset impairments, dealer restructuring, sales incentives and severance-related costs. In 2012, Chevrolet sold 195,000 cars and SUVs in Western and Central Europe. In the first 10 months of 2013, it sold 137,000 vehicles in the region. GM’s CEO Dan Akerson said the company’s European operation will benefit from focusing on its Opel and Vauxhall and from plans to expand the Cadillac brand’s presence in Europe. He stressed that “Europe is a key region for GM.” Most of the Chevrolet models sold in Europe are produced in South Korea, so GM plans to focus on profitability, cost management and maximizing sales in its Korean operations.