U.S. Example No Blueprint for European Industry Woes, GM Europe CEO Says

GENEVA – The recession-mitigation strategy adopted by U.S. auto makers does not directly translate for their European counterparts, says General Motors Europe President Karl-Friedrich Stracke.

GM, Ford and Chrysler met the challenge of the U.S. 18-month downturn that ended in mid-2009 by lowering their respective break-even points through downsizing. The rationalization, which also saw GM and Chrysler fall into bankruptcy only to be rescued with government aid, contributed to their current state of profitability.

Today, Europe finds itself in the grip of a slump that threatens the financial stability of entire governments. But Europe is not North America, Stracke reminds journalists during a roundtable discussion at the auto show here.

“We have 27 markets, so it’s a little bit more complex,” he says of the European Union.

Coping with the dramatic sales slide requires more precision. “You need to look to your different distribution channels,” Stracke says. “You have the rental channel, the fleet channel and the retail channel. The question is, where are you making the highest profit? From there, you make your decisions.”

This measured approach reflects the apparent serenity that surrounds GM’s tie-up with France’s PSA Peugeot Citroen. While Stracke insists there is significant “urgency” to realize the promise of platform-, component- and module-sharing spelled out in the alliance agreement, he and other executives say the deal is not a panacea for their respective capacity problems.

“Make no mistake. This alliance was not set up to fix anybody’s capacity issue,” says Stracke, who adds that GM Europe’s plants currently are running at 80% capacity on a 2-shift basis.

Capacity rationalization is an individual responsibility of every European OEM, he says. “There’s no question about it, that we will right-size and need to right-size and need to address our capacity. There is no other way out. We are working hard behind the scenes with every stakeholder engaged, in order to address that topic.”

Meanwhile, GM Vice Chairman Stephen Girsky repeats the cautionary statements of fellow GM executives and his counterparts at PSA, all of whom say scale was a consideration in their partnership, but not a driving force.

“Scale is important on certain products,” Girsky tells WardsAuto after Opel unveils two new vehicles. “(The deal) would provide scale for certain products. The economics will be better, or they’ll work where they ordinarily wouldn’t work.”

Stracke says he is most interested in the new products that will emerge from the auto makers’ joint investment in research and development. But it will be some three months before all the benefits of the alliance are spelled out.

“We will say what we have to say in due time,” he says.

Opel uses the show to unveil the Mokka, a compact cross/utility vehicle that shares a platform with the new Buick Encore.

“The driving dynamics of the Mokka have been tailored to the needs of urban life with all the advantages of off-road capability,” GM says in a statement. Customers will have a choice of three engines.

Also unveiled is the high-performance Opel Astra OPC. With peak output ratings of 280 hp and 295 lb.-ft. (400 Nm) of torque, GM promises the hatchback can reach a top speed of 156 mph (250 km/h).

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