Last year, General Motors announced plans to break even in Europe by 2015. But recent sales and fiscal data suggest that the goal may not be attainable in the less-than-two-years that remain to reach the target.
At the root of the problem is the glum automotive and economic landscapes in Europe, and it’s not entirely clear whether the automotive market in the region has bottomed out just yet as vehicle sales plunged 8.5 percent to 918,280 units in January 2013, the lowest in the last 23 years. Germany has become a particular cause for concern, as the country’s automotive market is now showing signs of a decline, even though it resisted the drop-off for most of 2012. The country, home to GM’s Opel operating unit, experienced an 8.6 percent decrease in car registrations in January 2013 on an annual basis.
There is, however, an upside to GM’s overall performance in the difficult European economic climate: The General’s sales fell at a slower rate (5.5 percent) when compared to the rest of the industry (8.5 percent). Helping slow the decline was the new Mokka subcompact crossover and Adam city car from Opel.
But even with GM’s sales declining slower than the rest of the industry, its 2012 fiscal data shows a $1.8 billion European loss in calendar year 2012 compared to $700 million in 2011 — denoting that the automaker is bleeding money at a faster rate. The fiscal bleeding seems to have slowed in the fourth quarter of 2012, however, as GM’s European division reported a $700 million loss in Q4 2012 versus $600 million in Q4 2011. Luckily, GM’s highly-profitable North American division made up for the European losses, but the losses in Europe nearly wiped out the $2.2 billion earned by GM’s International Operations for the full year in 2012. Of course, the financial results are chock full of special items and adjustments that impact the earnings figure.
Do these results show that GM is beginning to fall behind its plans for the mid-decade breaking even of its European arm? Perhaps. Nevertheless, the cause of the problematic performance doesn’t seem to be The General itself, Opel, Chevrolet, or Cadillac. Instead, it’s Europe’s economic climate that will continue to drag The General down to its 2015 break-even target. Coincidentally, GM’s cross-town rival Ford faces similar problems in Europe.