GM pumps $5 billion into loss-making Opel

GENERAL Motors shored up its embattled European division Opel by announcing it will invest $4 billion euro ($A5 billion) between now and 2016.

At the announcement made in Germany overnight, GM chairman and chief executive Dan Akerson re-iterated the company’s need for a “strong presence” in Europe “in terms of design and development as well as manufacturing and sales”.

“Opel is a key to our success and enjoys its parent company’s full support,” he said.

A large part of the money will fund research and development of new models and powertrains, with the company expected to introduce 23 new or refreshed models and 13 new engines by 2016.

Opel’s 10-year plan, called DRIVE 2022, predicts a return to profitability for the company by the middle of this decade.

Adam Opel chief executive Karl-Thomas Neumann said the funding demonstrates GM’s “complete support” for the ambitious plan.

General Motors’ European operations, led by Opel and its British sister brand Vauxhall, has accumulated losses of more than $A17 billion since 1999, including a loss of $1.8 billion last year alone.

Mr Akerson has previously warned that the bleeding must be stemmed – a clear direction to the Opel board to take drastic action if necessary.

Opel moved to dispel continued speculation that it could be sold off by GM, with chairman Steve Girsky telling Reuters that such talk was unfounded.

Continued contraction across the board in Europe has hampered efforts to balance the bottom line.

According to leading industry analyst Polk, vehicle sales in Western Europe fell a further 9.8 per cent for the first quarter of 2013, and were down 12.9 per cent in Opel’s home market of Germany.

A key to cutting overheads will be the alliance between GM and PSA Peugeot-Citroen, to share product development and manufacturing costs.

As reported, the joint venture between the two loss-making entities will see co-development of people-movers, a compact SUV and a new platform for the next generation of Opel/Vauxhall, Peugeot and Citroen light-cars.

At the same time as announcing the funding boost, Opel also reiterated details of how it planned to renew 80 per cent of its global engine portfolio between now and 2016, and launch several new transmissions.

The plan includes the roll-out of a new 1.6-litre direct-injection turbo-petrol engine producing either 135kW/280Nm in its economical form or 147kW/300Nm in performance-oriented form – with the first application being in the new Cascade convertible.

As reported, the company is also rolling out a new 1.6-litre turbo-diesel engine with claimed best-in-class economy figures. The 100kW/320Nm unit will debut in the Zafira people-mover, which as we reported this week has now been confirmed to join Opel’s Australian range by mid-year.

Earlier this year, Opel Australia confirmed to GoAuto that it was in it for the long haul after launching here last September, despite modest initial sales. The shift to markets such as Australia is part of a wider plan to diversify beyond its economically ravaged European hub.

The company launched with three model lines – the Corsa, Astra and Insignia – but is poised to double this with the introduction of the Zafira, Cascade convetible and Mokka small soft-roader. Earlier this year, it also added OPC performance versions of its original three models.

Further steps taken have included the introduction of 24-hour test drives, special driveaway deals on selected models and broader rural dealer coverage, as well as prominent sports sponsorships.