GO
Loading...

GM to Invest $5.2 Billion in Germany’s Opel

Getty Images

General Motors renewed a commitment to its loss-making European brand on Wednesday, pledging to invest 4 billion euros ($5.2 billion) in Opel by the end of 2016 to support new model launches.

GM is aiming for a slight improvement in its European business this year, but not enough to avoid a 14th straight annual loss as car sales on the continent plunge to their lowest in almost two decades.

Speculation has persisted that GM might shift Opel's assets off its balance sheet into a joint venture with struggling French ally PSA Peugeot Citroen, or even sell Opel entirely.

(Read More: GM Stock 'Undervalued': Steven Rattner)

"As a global automotive company, GM needs a strong presence in Europe - both in design and development as in manufacturing and sales," GM Chief Executive Dan Akerson told reporters at Opel's headquarters in Ruesselsheim.

"Opel is key to our success and enjoys the full support of its parent company," he added.

When asked specifically whether the 4 billion euro investment pledge guaranteed that Opel would remain a fully-owned unit of GM through 2016, Akerson declined to comment.

But his top lieutenant, Opel Chairman Steve Girsky, told Reuters that speculation of a disposal was unfounded.

GM's board met in Ruesselsheim to examine progress in the brand's turnaround plan dubbed "DRIVE!2022" and the difficulties faced by Europe's auto industry.

(Read More: GM Has Good News/Bad News March)

The company's adjusted operating loss in Europe widened to $1.8 billion last year from $700 million in 2011 and it only expects to achieve profitability in the middle of the decade.

New product launches should help it meet that goal, with Opel planning 23 new models including the upcoming Cascada cabriolet and 13 new engines.

GM's problems in Europe are anything but unique.

Fiat Chief Executive Sergio Marchionne said the company's losses in Europe could be worse than expected this year. According to industry estimates, western Europe's car market shrunk by roughly 10 percent in the first quarter.

(Read More: GM CEO Sees Strong US Sales, Despite Payroll Tax Bite)

Earlier on Wednesday, German premium carmaker Daimler said it may cut its 2013 profit forecast this month given the alarming rate at which Europe's car market is declining.

The current double-digit drop in car demand is all the more remarkable given that 2012 volumes had already plumbed lows not seen in 17 years.