NEW YORK ( TheDeal) -- General Motors Co. (GM - Get Report) on Wednesday reaffirmed its commitment to its money-losing European operations, pledging to invest billion ($5.2 billion) in Adam Opel AG to support the unit's recovery.
Speaking to reporters at Opel's headquarters in Ruesselsheim, Germany, GM chief executive Dan Akerson said, according to reports, "Opel is key to our success and enjoys the full support of its parent company," adding that GM was "fully supportive of the Opel turnaround plan."
GM shares advanced the most in three weeks gaining 3.2% to $29.28.
Detroit-based GM has had a shaky relationship with Opel in recent years. The automaker had planned to sell Opel during its 2009 government-assisted bankruptcy, but reversed course and instead committed to spend more than ¿3.3 billion to restructure the business amid an overall decline in auto sales in Europe.That decision has been criticized in years since as the company has struggled to win long-term agreements with Opel labor and the unit has compiled billions in losses. GM, meanwhile, has been attempting to build its North America-based Chevy brand in Europe, including signing a high-profile sponsorship deal with British professional soccer team behemoth Manchester United Ltd., leading some to believe the company is preparing to shed Opel in favor of selling Asia-built Chevys in the market. But Akerson has been consistent in his commitment to Opel, even as other auto execs have begun to question when, if ever, auto sales will rebound in the region. Sergio Marchionne, chief of both Italy's Fiat SpA and partner Chrysler Group LLC, has warned that losses from Europe could come in higher than expected this year due to shrinking sales. "There's a growing consensus that we will not be returning to pre-crash highs, but manufacturing capacity has not yet been adjusted," an auto source said Wednesday. "It isn't just about designing good cars. GM has to shrink Opel's footprint." Morgan Stanley in the fall estimated that due to Opel's continuing cash burn and its long-term pension obligations, the unit is a $15 billion to $17 billion drag on GM's overall value.
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