GM to invest $5.2 bn in loss-making Opel despite European slowdown

General Motors, the biggest US carmaker, is planning to turn around its loss-making European brand by investing €4 billion ($5.2 billion) in Opel by the end of 2016.

The massive funding commitment comes despite GM's expected 14th straight annual loss in Europe, with car sales having plunged to their lowest in almost two decades.

GM's adjusted operating loss in Europe rose sharply from $700 million in 2011 to $1.8 billion last year,  with profitability not expected  till the middle of the decade.

Speaking to reporters at Opel's headquarters in Ruesselsheim, Dan Akerson, CEO of GM, said, "As a global automotive company, GM needs a strong presence in Europe - both in design and development as in manufacturing and sales. Opel is key to our success and enjoys the full support of its parent company."

He said GM's board chose Germany for a regular meeting to get first-hand information on the progress on its 10-year turnaround plan dubbed DRIVE!2022 and the challenging European automotive market.

According to Dr Karl-Thomas Neumann, CEO of Adam Opel AG, a large part of the investment will into bringing 23 new Opel models and 13 new powertrains.

Although GM is taking a bold initiative for its European operations, currently there is no end to the region's problems, which is unlikely to be solved in the short term.

All carmakers operating in Europe have seen sales and revenues toppling since the past two years, especially the Western European car market, which has already shrunk to lows not seen in 17 years.

Italy's Fiat yesterday said that the European auto market might shrink more than expected this year due to increase in unemployment, tax hikes across Europe continue to erode demand for new cars.

Demand for new cars in Western Europe fell 10 per cent in March from a year earlier compared with a 8.2 per cent decline for the whole of last year, according to data from UK consultancy LMC Automotive.

Founded in 1862 by Adam Opel, the German carmaker became a wholly-owned subsidiary of GM in 1931.

Opel operates 11 vehicle, powertrain, and component plants and four development and test centers in seven countries, and employs around 37,000 people, with more than 20,000 of them in Germany as of December 2012.

The brand sells vehicles in more than 40 markets worldwide.