General Motors Company (NYSE:GM) will be heading to this week’s Motor show in Frankfurt, Germany to showcase their products and make a case for a turnaround in its fortunes in Europe. It has been six years since the auto giant decided to continue its troubled European operations and implemented a costly fix it plan to rebound to profitability, the results however have not been positive. The company, along with its American counterpart Ford Motor Company (NYSE:F) has endured deep losses in its European operations with GM losing more than $7 billion in the last five years in Europe.
About 13% of GM’s revenue comes from Europe. It is seen as an important market by the company though it remains a highly challenging one. The company shelved its plan to sell Chevrolet and Opel brands in Europe and the recent downturn in the Russian markets have also hit the company hard. Meanwhile European car manufacturers like Fiat Chrysler Automobiles NV (NYSE:FCAU) and PSA Peugeot Citroën are doing good business in the region, pointing to the strength of the local markets.
GM has seen increasing profitability in America; however the European operation seems to be trickier. There is also increasing competition from Asian auto makers like Hyundai Motor Co. and Nissan Motor Co. which might crowd the already overcrowded market field in Europe. Despite such problems, Europe is an important region as a healthy presence there helps balance exposure to other markets according to Stefano Aversa, the chairman of AlixPartners LLP’s Europe, Africa and Middle East operation.
The CFO of General Motors Company (NYSE:GM), Chuck Stevens said that the company’s focus is on building a viable and sustainable business in Europe. The auto maker’s target of 5% operating margin in the long term is half its margin target in North America. The company has directed much of its focus on the growing SUV market in Europe and is banking on the increasing demand for SUVs to sustain its turnaround in the region.
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