General Motors Names Forster European Chief in Revamp

June 18, 2004; Jeremy Van Loon writing for Bloomberg reported that General Motors, named Carl-Peter Forster, who heads the Opel unit in Germany, president of the European division in a reorganization aimed at returning to profit.

Frederick Henderson, 45, who was named chairman of General Motors Europe, becomes chairman and remains Forster's boss, he said at a press conference in Ruesselsheim, Germany. Forster, 50, will be responsible for integrating the Opel, Vauxhall and Saab brands. The changes are effective immediately.

``We're developing a single company culture for all of Europe, and all the GM Europe subsidiaries will pull together,'' said Chief Executive Rick Wagoner in the statement.

General Motors, based in Detroit, is trying to end losses in Europe that totaled $3 billion in the past four years. The company on Monday said the unit will have a loss this year, falling short of its forecast for earnings of as much as $100 million. It's been hurt by slowing German sales and losses at Sweden's Saab.

``It's a very difficult boat for them to turn around,'' said Dan Genter, chief investment officer at Los Angeles-based Genter Capital Management, which holds $1.6 billion of debt securities, including General Motors bonds. Many U.S. companies have struggled in Europe because of stagnant economies and increased competition, Genter said. ``You have not had the growth'' in Europe to support profits, he said.

Job Cuts?

Forster wouldn't rule out job cuts in Germany, where most of the unit's assembly and engineering workers are located. No decision about production changes or jobs at Opel has been made, he said.

Opel, where Forster has been chief executive since 2001, has had operating losses for the past four years while Toyota Motor Corp. and PSA Peugeot Citroen have taken market share. General Motors' share of the Western European market this year through May has fallen to 9.5 percent from 9.9 percent a year earlier.

Toyota's share has grown to 5.2 percent from 4.6 percent.

``Opel needs to be more integrated with General Motors,'' said Forster during the press conference. Opel will be responsible for designing medium-sized vehicles worldwide, he said, adding that the German company has ``tremendous opportunities'' with the design responsibility.

``We have a lot more products coming through,'' he said, without providing details.

Saab Plan

Saab has been hurt by unfavourable currency changes and slower- than-expected sales of the 9-3 and 9-5 cars. Its product line is being broadened using shared components with other General Motors brands, said Vice Chairman Bob Lutz. The new models will ``look and feel like Saabs,'' he added. A new small Saab, the 9-2, is based on the engineering of General Motors' Fuji Heavy Industry's Subaru brand and will be built in Japan.

The management changes are the beginning of a wider reorganization at the European operations, Lutz said.

``We can't solve the problem by opening the hood, but we have to open the hood to solve the problem,'' he said.

Forster, a former Bayerische Motoren Werke AG executive, cut Opel's factory capacity and jobs and introduced new models, such as the redesigned Astra small car.

Henderson took over the European business in June after being head of the Asia-Pacific unit. He moved from General Motors' most profitable region, which benefited from rising sales in China, to its biggest money loser.

The European unit was among the most profitable General Motors' business in the early 1990s. Chief Financial Officer John Devine, 60, has said Europe is among the biggest obstacles in reaching a profit goal of $10 a share by 2006.

The unit's first-quarter loss widened to $116 million from $65 million a year earlier.

Astra Surprise

Hans Demant, vice president of engineering for the European unit, will become managing director at Opel. Forster will also become supervisory board chairman at the German carmaker.

Orders for the new Astra have been ``very good and positively surprised us,'' said Demant. Opel is looking for additional capacity to increase production, he added, without providing a full- year sales target for the car.