NEW YORK (TheStreet) General Motors
(GM) said Thursday it would drop its Chevrolet brand in Europe by the end of 2015, focusing all resources on its ongoing effort to restructure its Adam Opel GmbH unit.
Detroit-based General Motors said the decision would result in one-time charges of up to $1 billion, but should generate long-term marketing, distribution and production savings. Post-shutdown, Chevrolet will still offer specialty vehicles such as the Corvette on the Continent, and will keep a broad presence in Russia and the Commonwealth of Independent States.
GM said that the move would boost its Opel and Vauxhall brands and reduce the complexity of having two competing organizations in a region that has struggled in recent years. The automaker will continue its push to expand its higher-end Cadillac brand in Europe, which the company said remains important to its overall success.
"Europe is a key region for GM that will benefit from a stronger Opel and Vauxhall and further emphasis on Cadillac," company 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."
GM said the charges, which will primarily be recorded in the fourth quarter of 2013 and the first half of 2014, include asset impairments, dealer restructuring, sales incentives and severance-related costs. The automaker also warned it expects to incur restructuring costs not treated as special charges that will impact earnings at its international operations in 2014.
GM has operated Chevy in Europe since 2005, selling mostly South Korean-built vehicles designed to compete against other budget offerings in Europe. The designs failed to gain traction against competitors including Hyundai and low-cost vehicles from Renault, and have been hit hard by a slowdown in European demand.
Chevy Europe in recent years has been moving up-market, putting it in direct competition with Opel. During GM's government-assisted restructuring, the company considered divesting Opel and likely was positioning Chevy to replace the unit if it was sold. With GM reversing course and pledging to keep Opel in house, Chevy increasingly was seen as redundant.
GM has bled through more than $18 billion in Europe since 1999, but earlier this year pledged to invest 4 billion ($5 billion) in Opel to try to turn the brand around and restore it to profitability.
The move to shutter Chevy in Europe figures to impact production at GM Korea, which manufacturers more than 180,000 vehicles annually for sale in Europe.
Sergio Rocha, GM Korea president, said the company is seeking to become more competitive in the country: "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."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV