GM chief says ‘fix’ in Europe needed to end losses
General Motors Co., the world’s largest automaker, needs to mend its European operations and end losses in the region to give investors confidence to buy the company’s shares.
“We have to fix Europe,” Chief Executive Officer Dan Akerson told reporters before the automaker’s annual shareholders meeting today in Detroit. “At least get it to where it isn’t draining the corporate coffers.” GM posted a first-quarter adjusted operating loss in Europe of $256 million and also had $590 million in write downs.
Akerson is pushing to raise operating margins and bolster the Cadillac and Chevrolet brands globally after the company posted a record annual profit of $9.19 billion and outsold Toyota Motor Corp. to regain the title of the world’s best- selling automaker last year.
Even with those successes under Akerson, GM’s stock fell 45 percent in 2011. Shares, including the U.S. government’s 32 percent stake, have declined 34 percent from the automaker’s November 2010 initial public offering through yesterday, attracting value investor Warren Buffett’s Berkshire Hathaway Inc. GM was unchanged at $21.92 at 12:22 p.m. in New York.
“Why is the stock down?” Akerson said. “Because there’s uncertainty in the future. The most obvious is Europe.”
GM Europe had a 2011 loss of $747 million before interest and taxes. European operations were on target to break even last year until November when the company said those plans were off track as the economy worsened.
Labor Negotiations
New labor agreements in Poland and England have “significant impact on the potential future in Europe,” Akerson said today. GM is in talks with unions in Germany that “are constructive, they’re professional and it’s our hope and expectation that we’ll come to some sort of mutual understanding and agreement.”
The company’s Opel unit will stick to a labor agreement not to close factories before the end of 2014, Karl-Friedrich Stracke, president of GM’s European operations, said May 3. A possible buyout package for employees in Germany to leave is “in discussion,” he said at that time.
GM had an adjusted profit margin before interest and taxes of 5.8 percent in the first quarter. Akerson said in an interview at Bloomberg headquarters last month that “world class” margins are 8 percent to 10 percent.
Akerson told reporters today the automaker may possibly seek further steps to reduce its pension obligations.
Pension Obligations
GM said June 1 it’s offering lump-sum payments to about 42,000 salaried retirees and shifting plans to a Prudential Financial Inc. unit, eliminating about $26 billion in the automaker’s pension obligations.
GM can bring up doing something similar with the United Auto Workers union, Akerson said. The idea was discussed with the union in “broad terms” during last year’s contract negotiations, he said.
“I’m not saying we’re going to do it, but it’s certainly something that we would consider if the opportunity arose,” he said. The current contract doesn’t expire until September 2014.
Shareholders re-elected 12 directors, including Akerson, 63, and added two new members: Jim Mulva, 65, former ConocoPhillips chief executive officer, and Tim Solso, 65, retired CEO of Cummins Inc. The board also is scheduled to meet today.