To get General Motors firing on all cylinders, chief executive Daniel Akerson needs to fix the sputtering European unit Opel.
But the European automaker's strategy has in the past been affected by short-term financing problems at the parent company, leaving Opel without a clear road map to profitability, people familiar with the company say.
Opel remains a high-cost player in a low-growth region, in a segment dogged by cut-throat competition, leading to speculation of a sale or labour concessions by its workers.
However, neither a sale or a quick fix to return to sustained profitable growth are easily achievable, analysts and experts say.
"GM is frustrated with Opel's turnaround," said a person familiar with the matter who asked not to be identified. "Opel has been a challenge for years."
"Europe is hard," another person familiar with the industry said. "There are so many structural impediments in the auto sector, which is so tied into cultural, media, political dialogues that it becomes very hard to make big changes, and big changes are often times what's needed really to solve the issues."
Akerson faces the challenge of running a large industrial company, where decisions are closely watched.
On the one hand, GM faces political resistance to plant closures and job cuts. Growth is also limited by a reluctance to expand Opel's geographic footprint on fears the brand is too regional and would cannibalise market share gleaned by other established brands within the GM stable.
The US automaker dropped plans to sell Opel in 2009 after months of negotiations and embarked on a drastic restructuring to get the unit, which lost $1.6 billion (Dh5.8 billion) last year, back on track.
Akerson has never been much of an Opel fan. He was one of only two GM board directors in late 2009 to vote against keeping it, believing Europe was a market of national champion automakers Volkswagen in Germany, Fiat in Italy and Renault in France and pan-European luxury brands like BMW and Daimler AG's Mercedes, a person familiar with Akerson's thinking said.
Opel is neither and Akerson believed it would be a long, uphill battle to fix it.
At last week's shareholder meeting in Detroit, Akerson was clear where Opel stood.
"We're going to try to define a slightly different brand and product strategy by having a global premium brand, Cadillac, and a global value brand, Chevrolet," he said.
"Then we will flank those two global brands with regional brands such as Opel/Vauxhall," he added.
"That would be a brief outline of what I think we need to focus on over the next three to five years."
That is a hard pill to swallow for Opel executives who believe their company could be a global brand.
"There has always been inside of Opel a little independent streak," said the first person familiar with GM.
"It's Germans thinking Americans don't know what the hell they are doing."
That scenario is not likely, however, analysts and industry officials said.
"What would be the benefit financially to General Motors to support Opel on a global basis? The payback probably would not be sufficient," Jefferies analyst Peter Nesvold said.
"You need to pick the brands that have the most likelihood of success and concentrate your marketing dollars behind them," he added, pointing to Chevy and Cadillac.
It is that focus that led to reports GM is weighing an Opel sale, something Opel officials have dismissed as speculation. However, US brands like Chevy have not proven as popular in mature European markets as established brands like Opel and Vauxhall, a move that would make it hard for GM to substitute Opel with Chevy.
From / Gulf News