General Motors is putting a new team in place to fix its troubled European operations, setting up the likelihood of more job cuts and even plant closings.
When GM reports fourth-quarter earnings next week, it is expected to show a loss in Europe for the 12th-straight year. The automaker said in November it would miss its target of breaking even in the region in 2011 after a highly publicized restructuring effort.
So the automaker has focused its top minds -- with a few potential future CEOs among them -- on fixing the problem. CEO Dan Akerson last fall appointed Vice Chairman Steve Girsky to lead the supervisory board that oversees its European unit, Adam Opel.
Joining him in recent months were product development head Mary Barra, Asian chief Tim Lee and Chief Financial Officer Dan Ammann.
In a signal of how urgently more aggressive action is needed, former AlixPartners' consultant Thomas Sedran has been named a vice president at Opel, charged with "developing and implementing business strategies for long-term profitable growth." He starts April 1.
Labor leaders have also jumped into the game; they're preparing to appoint UAW President Bob King to one of their spots on the Opel board, two people familiar with the situation said. The implication: German unions are preparing for more job cuts and concessions, not unlike the cuts and plant closings that GM carried out in its 2009 U.S. restructuring.
"I think we saw, historically speaking, that when there's a sense of urgency, change can be stomached," said Michael Robinet, managing director of IHS Automotive Consulting. "It is not welcome, but certainly it is understood. We are certainly at that level. At some point, you have to pay the piper."
GM's most recent European cost-cutting was not enough. In the seven years preceding its 2009 bankruptcy, GM Europe had lost an average of about $1 billion a year. So during its bankruptcy, GM prepared to sell 55% of Opel to a group led by Canadian supplier Magna International.
But after GM's bankruptcy left the automaker flush with cash, its board decided Opel's global scale and engineering and design centers were worth keeping. So GM cut about 8,000 jobs and got workers to accept annual wage and benefit concessions to save hundreds of millions of euros.
GM Europe posted a profit in the second quarter of 2011. But the business unit's recovery fell short of expectations, losing money in the third quarter. The rumblings of change began. Engineer and German native Karl-Friedrich Stracke took over GM Europe from Nick Reilly.
Europe's month after month of economic woes have heightened the expectation for more job cuts. Enter Lee, a manufacturing guru; Barra and Ammann, a former investment banker.
Lee is nearing retirement, but Barra, Girsky and Ammann are often named as potential CEO candidates -- especially if they can make money in Europe. Two years after GM's bankruptcy exit, the region is the primary hurdle standing in the way of a sustainable GM turnaround.
"Europe is a big question mark for us now," Akerson said at last month's Detroit auto show. "It's hard to make predictions."
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