GM plans to pull struggling Chevrolet brand out of Europe in 2016
by Dan Ilika
Nameplate never posted European market share higher than 1.28 per cent since re-launch in 2005
DETROIT—General Motors could take a financial hit of as much as $1-billion after announcing it would pull the brand out of the region in 2016 following years of struggle.
The automaker, which re-launched in Europe in 2005, said it will pull the plug on the brand there “due to a challenging business model and the difficult economic situation” in the euro zone.
GM said the brand will live on in Russia and the Commonwealth of Independent States (CIS)—comprised of nine former Soviet Republics—past 2016.
The Chevrolet nameplate never truly caught on with European consumers, with the automaker posting a best market share of 1.28 per cent in 2012.
The 194,647 light vehicles it sold on the continent last year was the second lowest number on record since 2005.
Its best year was 2007, when it sold 216,150 units in the region that some 500 million people call home.
By contrast, the automaker sold 205,000 in Russia alone last year.
As it withdraws its range of Chevrolet vehicles from the region, GM said the Corvette will still be sold in Europe, and the new strategy won’t impact the expansion of Cadillac across the Atlantic.
According to GM, the move to eliminate Chevrolet will also improve its Opel and Vauxhall brands’ abilities to compete in the hard-hit euro zone.
“Europe is a key region for GM that will benefit from a stronger Opel and Vauxhall and further emphasis on Cadillac,” GM chairman and CEO Dan Akerson said in a statement.
“For Chevrolet, it will allow us to focus our investments where the opportunity for growth is greatest.”
The decision won’t impact warranties on Chevrolet vehicles sold between now and the end of 2015, the automaker said.
The majority of the Chevrolet products sold in Europe are built in South Korea, and GM said it will work to mitigate the impact of the lost manufacturing.
“We will continue to become more competitive in Korea,” GM Korea president and CEO Sergio Rocha said.
“In doing so, we will position ourselves for long-term competitiveness and sustainability in the best interests of our employees, customers and stakeholders, while remaining a significant contributor to GM’s global business.”
GM expects to record net special charges of $700-million to $1-billion, mainly in the fourth quarter of 2013 and through the first half of 2014 as a result of this decision.
An estimated $300-million of the charges will be non-cash expenses, according to the automaker.
The firm also expects to incur restructuring costs related to the move that will not be treated as special charges, but will impact GM’s bottom line next year.
