As part of its plans to turnaround the losses in Europe, General
) is refreshing its Insignia model. The model will feature a new
engine which will be available in a diesel as well as a gasoline
variant and will offer more technological features in an attempt to
resuscitate the overall brand perception in Europe. This is the
eighth car that the automaker has introduced or refreshed in the
last three years.
Some of the other recent introductions include the Mokka SUV and
the small car Adam which have had moderate success. Opel's market
share in the first half of the year remained pretty much flat at
Need More Than Just Model Refreshments
Although GM's European operating losses narrowed to $110 million
in the second quarter compared to $394 million in the previous year
quarter, plenty of work still needs to be done. Particularly
for Opel, it's not just a question of new introductions but
rebuilding the entire brand in order to ensure a steady cash flow
for the future. Right now, the Opel brand is weak, its cars
are not trend setters and the technology/designs in its vehicles
are seen as a generation behind. The Opel brand, along with its
sister concern Vauxhall in the U.K., has lost more than $18 billion
In addition to new models, GM is also spending heavily on
marketing in order to improve its image in the region. The
automaker reportedly spent more than $30 million on advertising for
the Adam. Furthermore, the company is sponsoring a number of soccer
clubs across Europe.
See full analysis for General Motors
GM is in the process of restructuring its operations in Europe
which includes shutting down the Bochum plant in Germany by 2016. A
number of automakers have been plagued by overcapacity issues in
the region. Moreover, governments and labor unions are a major
impediment to shutting plants with excess capacities. GM initially
estimated that its European losses could top $2 billion in 2013,
although a strong performance in the first half of the year
suggests that the automaker might contain the losses well
within that figure.
Markets Bottoming Out ?
The European automotive industry has been badly hit in the last
couple of years with the market on course to register the lowest
sales figures in the last twenty odd years. Overall, the European
auto market is down 6.7% in the first half of the year. But the
rate of decline has slowed down in the recent months suggesting
that the market might be nearing its bottom.
Another challenge that remains for the company is how to
position the 'Opel' brand along with the 'Chevy' brand. Currently,
the Chevy brand is positioned as a small car brand in Europe. Opel,
on the other hand, is positioned a little more upscale and targets
more affluent customers. But Chevrolet sales have tanked 23% in the
first half of the year dragging down GM's overall European sales.
This is another issue GM needs to work on.
We have a
$38 estimate for General Motors,
which is slightly above the current market price.
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