Emerging markets still booming Lee says

Emerging markets still booming, Lee says.

GM International Chief Sees Remedy for European Ops as Sales Soar Elsewhere

Adam Opel long has been a drag on GM’s stock price, pulling shares down 26% since the U.S. auto maker returned to trading in 2010 and has shown solid profitability otherwise.

DETROIT – Tim Lee, president of General Motors International Operations and a supervisory board member at the auto maker’s struggling Adam Opel unit in Germany, expresses optimism for the subsidiary’s restructuring in Europe despite economic and political headwinds.

“There are significant opportunities yet remaining in Europe, in terms of the operation of Opel/Vauxhall and the operations of Chevrolet and Cadillac,” Lee tells journalists during a recent wide-ranging interview at the North American International Auto Show here.

Lee also says GM management remains bullish on other markets under his watch, such as China and India.

But while Asia has shaken off the global economic crisis affecting auto makers in 2008 and 2009, Western Europe’s sovereign debt crisis continues to drag on consumer confidence and present difficulties to OEMs selling in the region.

GM faces particular problems, having begun a massive restructuring of Opel after deciding to retain the unit instead of selling it as planned as part of the Detroit auto maker’s 2009 bankruptcy proceedings.

However, Western Europe’s economic malaise forced GM late last year to double down on the Opel fix, bringing Vice Chairman Steve Girsky, Chief Financial Officer Dan Amman and Lee to the unit’s supervisory board.

GM reportedly wants to downsize Opel further, as well as shift production of some Chevrolet-branded vehicles currently built in Asia and exported to Europe. The production shift would provide bargaining clout in negotiations with German unions and enhance efficiency. The auto maker has not commented on the production shift.

In doing so, GM likely would face governmental hostility similar to when it sought to sell Opel to a consortium of investors led by Canadian parts maker Magna three years ago. The see-saw negotiations strained relations between GM and European Union leaders.

Morgan Stanley recently removed GM from its top picks among auto stocks, issuing skepticism over the auto maker’s ability to make the sweeping capacity reductions the U.S. investment bank considers necessary to make Opel viable.

Opel long has been a drag on GM’s stock price, pulling shares down 26% since the U.S. auto maker returned to trading in 2010 and has shown solid profitability otherwise.

GM sold 1.7 million vehicles in Europe in 2011, up 4.4% compared with year-ago. Its share of the market, which includes Eastern European countries and Russia, stayed flat year-over-year at 8.8%.

Prior to the economic downturn in 2008, GM sold a record 2.2 million vehicles in Europe and commanded a 9.5% share of the market.

Lee, who spoke with journalists ahead of Morgan Stanley’s action and news of the potential production shift, says a number of efficiencies stand to be gained in Europe. He cites as one example reconsolidating spare-parts warehousing between Opel and other GM brands after being separated during the 2009 divestiture attempt.

“We currently run those in a parallel path, and that’s just not what we want to do,” he says, blaming now-remedied “structural issues” within GM for the holdup. “We have not brought back together a lot of behind-the-curtain things that could be together. So there are synergies there, and we will work on them.”

At the same time, GM likes the prospects of re-introducing Cadillac to the European market after a failed bid to do so late in the last decade. A halo sport wagon for the brand and the ATS small sports sedan unveiled at the Detroit show represent key products Cadillac previously lacked.

Chevrolet would bookend Cadillac under Opel, with momentum seen coming from the re-badging of its products sold in Europe from Daewoo to the bow-tie brand and built on global GM platforms.

However, GM missed a key opportunity last year because its European Chevrolet portfolio lacked a full lineup of diesel engines, which regional buyers overwhelmingly prefer.

The earthquake and tsunami in Japan earlier in the year halted supply of a computer chip needed in the diesel engines, forcing GM to source the chips from another supplier and then conduct fresh integration and validation.

“That process is not something you do in a day or two,” Lee says. “It takes about six months, so we were out of the diesel-engine business. Now we’re completely out of that (dilemma) and no longer constrained.”

Opel was affected, as well, but to a lesser degree because its diesel engines are sourced locally.

In China, where GM continues to build momentum from its early foothold two decades ago, sales with its joint-venture partners last year grew 8.3% to 2.5 million vehicles.

“We picked up considerable share in China in 2011, and we expect we will do similarly (in 2012), because we’ve got a lot of launches,” Lee says.

In India, GM total vehicle sales increased but growth trailed the industry. Lee blames that on the market’s big year for commercial vehicles, a product the auto maker will not market in the country until later this year.

GM’s growth in Russia in 2011 did outpace the industry with sales of 244,000 units, up 53%, making the auto maker the country’s No.1 non-Russian OEM and Chevrolet the top non-Russian brand. GM’s share of the Russian market grew nearly two percentage points to about 10%, Lee says.

Korea was another key growth market, where completion last year of a changeover from the Daewoo brand to exclusively Chevrolet helped GM grab an 8.9% share.

“There is no reason why we should not have double-digit share in Korea,” Lee says. “It is not a foregone conclusion Hyundai and Kia should own 80% of the Korean market.”

Overall sales for international operations grew 7.5% to 3.3 million units in 2011, helping GM claim the crown of world’s No.1 auto maker for the first time since 2007. The volume uptick accompanies alongside a gain in global share to 11.9 from 11.5% year-ago.

GMIO’s market share of the countries it in which it competed last year grew to 9.5% of the industry from 8.9% in like-2010.

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