Dump It And Move On, Says Morgan Stanley
GM Europe lost $1.8 billion in 2012, at the top end of company forecasts, said 2013 would be slightly better, and retained its target of breaking-even by mid-decade.
Morgan Stanley analyst Adam Jonas repeated his long held view that GM should dump its money-munching European subsidiaries Opel and Vauxhall.
“We continue to believe that drawing a thick black line under Europe is the most powerful way to improve the company’s (GM’s) risk-profile and share price going forward,” Jonas said.
Last October, GM Europe had forecast losses for 2012 of between $1.5 and $1.8 billion, the 13th straight year of red ink. In the fourth quarter the company lost $696 million compared with a loss of $562 million in the same period of 2011. In 2011 as a whole, GM Europe lost $747 million.
GM wrote down $5.2 billion worth of assets in Europe and $220 million, or about half, of its investment in Peugeot-Citroen. GM owns seven per cent of the French company.
GM said it was not expecting an uptick in European auto demand later this year, and expects conditions to worsen industry-wide in the region. It said operating losses would be trimmed slightly in 2013.
When it predicted losses for 2012, GM Europe also predicted break-even by mid-decade. It didn’t change this forecast with the latest results.
Neil Winton – February 20, 2013