General Motors Co. (IW 500/4) announced plans to cut thousands of jobs in Europe after losses there contributed to a 12% drop in third-quarter profits.
Europe has long been a drag on GM's bottom line, but the automaker said it is well on the path to achieving long-term profitability there despite expectations that regional demand will not rebound from current depressed levels for quite some time.
GM said it will have eliminated 2,600 jobs in Europe by year's end through natural attrition and buyouts as it works to reduce fixed costs and slash production.
"We will continue to drive further headcount reductions in the future in line with demand," GM Vice Chairman and European turnaround leader Steve Girsky said in a conference call.
The automaker also plans to eliminate a third shift in its Eisenach, Germany, plant in the first half of next year, has no plans for future production at its Bochum plant once Zafira ends its run and said the future of its Strasbourg plant is "under review."
Asked if that review could entail a possible sale of the Strasbourg plant, a spokesman told AFP that "GM is now in discussions with an interested party on the potential of such a transaction."
GM's fixed costs in Europe are expected to be down $300 million this year compared with 2011 -- in part due to headcount reductions and more flexible labor contracts -- and Girsky said it plans to slash another $500 million in fixed costs through 2015.
"Despite the terrible economic environment in Europe, we're not sitting still. There are some green shoots springing at Opel despite the mud," Girsky said. He noted that Opel has gained market share in nine countries and said GM will introduce 23 new products in Europe by 2016.
Sales in North America and Asia Buoy Q3
GM reported third-quarter net income of $1.5 billion, well above Wall Street expectations, largely because of higher sales in North America and Asia.
Earnings of 93 cents per share, excluding one-time items, roared past analysts' consensus estimates of 60 cents.
Revenue rose 2.4% to $37.6 billion in the July-September quarter, sharply higher than the $35.7 billion expected by analysts.
For its troubled Europe operations, the company forecast a 2012 loss of between $1.5 billion to $1.8 billion, depending on the level of restructuring under way in the fourth quarter.
GM Europe had an adjusted loss of some $500,000 in the third quarter, up from $300,000 a year ago. The company said it expects the full-year 2013 results to be "slightly better" than 2012, and break-even results were "targeted by mid-decade."
The weak European results were partly offset by improved performances in international and South America businesses.
In North America, the automaker reported better-than-expected $1.8 billion earnings before interest and taxes, down from $2.2 billion a year earlier.
"GM had a solid quarter because customers around the world love our new vehicles, and we're also seeing green shoots take hold on tough issues like complexity reduction, pensions and Europe," said GM CEO Dan Akerson.
Last week, German competition authorities approved a proposed alliance between French carmaker PSA Peugeot Citroen (IW 1000/47) and GM, which owns Germany's Opel.
In an alliance unveiled in February, the two auto giants said they would develop joint platforms and technologies and pool their purchasing activities in order to cut costs.
"While we still have a lot of work to do, especially in Europe, it is encouraging to see our results begin to reflect the discipline we are bringing to bear on the overall business," GM's CFO Dan Ammann said.
Copyright Agence France-Presse, 2012
By Veronique Dupont