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Barra motion to sell Opel signals a deeper change at GM.
General Motors CEO Mary Barra countries with Opel Insignia Tourer at Opel headquarters in Ruesselsheim, Germany, January 2014 Opel sale means GM no longer seeks to be a key player in all major automotive markets, but focuses on cash flow and profitability instead of volume BLOOMBERG photo credit sales.
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Barra said PSA-Opel deal would benefit both companies.
DETROIT - General Motors CEO Mary Barra decision to the European operations of the company on the block is a landmark for the automaker that prides itself to be once the No. 1 automaker in the world.
If Barra finished off an agreement with the French automaker Peugeot SA - and familiar with the discussions Tuesday warned that many details need to be resolved - it will have delivered unexpectedly on his promise to have GM we rather disturbing than waiting to be shaken by external forces.
Opel sales means GM no longer seeks to be a key player in all major automotive markets, but focuses on cash flow and profitability instead of sales volume.
There are risks to abandon markets, especially as big as Western Europe GM faces a continuing struggle to stop losing share in its main markets simultaneously, Barra is facing pressure to do even Moreover, with the share price of GM - even after Tuesday's near 5 percent gain - below the level of 41, he had just before she took over the business.
We believe that GM investors are willing to take more drastic measures to optimize the allocation of capital, Morgan Stanley analyst Adam Jonas wrote in a note.
Shedding GM Europe is not focused on the disruption Barra technology generally refers to presentations to investors, but it is a major shift for the company.
GM executives have long argued that the possession of Opel in Germany provided the business expertise in engineering to develop small and medium sized cars it needs for the US and Asian markets is one of the reasons why GM in 2009 pulled the plug on a plan to sell its European operations to Magna provider.
But small cars are losing ground in the US, China and elsewhere to SUVs and crossovers same time, more stringent emission and safety regulations are more expensive European cars and harder to sell on other markets, analysts said.
What's also changed since 2009 is GM's relationship with its Chinese partners, which give it an alternative to the development of small cars in Europe GM designed a new range of low cost car for Asia and Latin America with its Chinese partner Shanghai automotive Industry Corp. Sign of the distance Chinese automakers rose.
Bob Lutz, GM's former vice president and head of product development, GM said Tuesday could structure an agreement with PSA that still allow the development of joint products, and could leave open the possibility of exporting some Cadillac or Chevrolet models Europe.
The proceeds of the sale that would do wonders for the stock price would an acceleration of activity in North America and China; a much better use of resources, Lutz said in an email, adding that he has not been in contact with anyone at GM.
Analysts warned Tuesday the transaction price could be lower The final price will depend on how GM and PSA would share - or not share - intellectual property, pension liabilities, debt and restructuring costs, as analysts.
Even after his traumatic 2009 bankruptcy, GM fought to remain a major player in all major auto markets worldwide, and compete with rivals Toyota Motor Corp. And Volkswagen AG for the title of world's largest automaker by vehicle sales.
GM Opel sale would mean setting aside the traditional measures of success for a small company focused on the US truck market, China and some - but not all - the major growth markets in the direction of Latin America and Asia Sub Barra, GM left Russia and Indonesia after concluding that it could not achieve acceptable returns on investment.
Barra made the return on investment, cash flow for the repurchase of shares and profitability of the key measures of the success of GM, not sales volume.
GM Europe fails these tests, despite over 1 billion spent on restructuring efforts since 2012.
The decision to leave is the business strategy 101 - Move away resources unattractive markets with weak competitive positions, to attractive markets with strong positions - especially areas for long-term success of GM are probably more important Barclays analyst Brian Johnson wrote in a note Tuesday.
GM declined to Barra or other executives available for comment Tuesday.
Barra said PSA-Opel deal would benefit both companies.
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