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GM Says Long-Term Benefits Outweigh Short-Term Costs Of Opel Sale

General Motors chief financial officer, Chuck Stevens, dropped a bit of bad news this week when he told analysts the sale of Opel will now carry an estimated charge of $5.5 billion.

That’s up from the original $4.5 billion estimate as GM continues to pour investment into Opel and its European operations while it’s still owned by the U.S. automaker. However, GM reassured the long-term benefits of unloading Opel, Vauxhall and its European operations outweigh the short-term costs, according to Forbes.

In the future, the money spent on Opel and European investments can be funneled into profitable markets like booming China and North America.

“We have been spending approximately $1 billion a year in capex [capital expenditures] in Europe,” Stevens said in an April conference cal. “We would expect this to be fully recaptured and create about $1 billion annual improvement in adjusted automotive free cash flow, all else equal.”

GM has been motivated to drop money-losing markets from places it does business in. Recently, GM also announced its intentions to pull its vehicle sales from the country of India as well.

Opel and its new owner, PSA Groupe, believe the sale may be finalized by the end of July, ahead of the previous end of 2017 estimate.

Former GM Authority staff writer.

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Comments

  1. So are they saying that the CapEx is not accounted for in the yearly losses? I *still* don’t see how this adds up.

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  2. No amount of PR spin can hide the fact that GM has admitted they do not have the skills to compete in the third largest market in the world. To blow nine decades of building a presence in Europe in the failed hope that share prices would rise was a decision that will be questioned for years ahead.

    It certainly lacks vision for the future. At a time when expansion is seen as the ticket to spreading procurement and significant product development costs across a larger number of units, GM is contracting.

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  3. Europe is not a growing market if anything it is declining. To grow in that market is a challange to about any brand.

    If you note most of the Euro brands would be failing if it were not for the North American Market or Chinese market.

    The only way to make money in Europe now is to go with Luxury in lower volumes and higher prices or Corvette and Camaro.

    Labor cost are high, eviromental regulations are tough and only getting tougher. The Euro goverment is only going to get more controlling and the terror issues are only going to get worse.

    You can continue to pour time and money into the market and struggle or you can just take that money and invest it in other markets with more potential for growth.

    There are times a step back is the way to move forward. Goodyear tire invested and diversified into many fields from aerospace to oil pipelines. This drew them away from tbeir core market. The product suffered and they were in a very weak financial position.

    They sold off the non tire lines and focused on the core product in the strongest markets for growth. Today they have regained their strength and are more profitable than in decades.

    There are two ways forward here you can try to go big or go efficient. VW and Toyota are about the only two that can afford to go big. Everyone else needs to be much more efficient.

    I know it hurts some pride here but to continue with half ass gains in Europe is no way forward for GM coming off the Bail out.

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  4. Over the years GM has made some good & bad decisions regarding it’s European brands. This would have to rank as it’s worse decision & one I feel they will regret almost immediately, we can go on about the range & that they cover A to E segment of the market & also have the latest SUVs (Mokka x & Crossland x, not to mention soon to be launched Grandland x). But there’s bigger issues here – (even if some of the models help give GM’s other brands additional models, Cascada as a example). Regardless of models, although it’s obvious to see the current range is very competitive GM is throwing away something much bigger & something you cannot put a price on, the infrastructure of established dealers, decent reputation & major player market share can never be replaced & never will. Years down the line GM will want Europe back & will wish they’d not let go of all they had, once it’s gone it’s gone. GM will be a small time player in Europe if they give away what they have.

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  5. I realize that GM has lost money on Opel for years, however, the picture was improving. Opel’s technical expertise will be missed. For example, the new Buick Regal coming to the states is a technological “tour de force” with its LTG engine and the 9T50 transmission. The handling will be better than anything GM could have designed n the U.S. I have a 2011 Regal Turbo assembled in Oshawa that has caused zero problems and is a joy to drive. I am considering replacing it with the 2018 model.

    If GM in Detroit had tried harder and looked further than to sell Opel, it could have been made profitable. With PSA, I fear Opel’s expertise and excellence will be lost to us in the U.S.A. If Opel survived WWII and total destruction, it seems a shame to throw in the towel now.

    Reply
  6. Interesting how the European market has changed since GM stepped way.

    Reply

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