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GM pulling Chevy out of Europe

2013-12-06 08:00

NEW IN US, OUT OF EUROPE: The Chevrolet Colorado Z71 off-road truck is launched at the 2013 Los Angeles auto show - two weeks later Cheverolet has pullout out of the European market. Image: AFP

DETROIT, Michigan - General Motors will drop the Chevrolet brand in Europe by the end of 2015 because it failed to build significant market share.

The auto giant's focus will be fully on European brand Opel.

The world's second-biggest carmaker (behind Japan's Toyota) said on Dec 5 2013 that the decision would result in one-time charges of up to $1-billion but it should lead to production, marketing and distribution savings.

BUDGET BUYS

GM shares were up 1.1% at $39.13 in afternoon New York Stock Exchange trading.

A spokesperson for GM SA said the pull-out decision would not affect the South African market in any way.

"We do not source any Chevrolet products from Europe," she said. "We continue to sell and service Chevrolet products in this market and will introduce exciting new products to strengthen our overall Chevrolet portfolio.

"Chevrolet is gaining good traction in SA and since the re-entry of the brand at the end of 2003 sales volumes have grown exponentially. In 2012 we sold more than 50 500 Chevrolet vehicles in SA."

Chevrolets, reintroduced to Europe in 2005, were to compete at the budget end of the market with the likes of South Korea's Hyundai, VW's Skoda and Renault's Dacia while turning GM's mainstream nameplate into a global brand.

But the Chevy brand, by far GM's biggest in its home US market, failed to make much headway in Europe as its largely South Korean-made cars struggled against rivals, some of which are customised for European markets.

'A LITTLE ABOUT-FACE'

Hurt also by a brutal downturn in European demand, Chevrolet responded by slashing prices and introducing more high-end models  but that pitted it against Opel and Vauxhall (English version of Opel) and Chevy's sales showed little progress at about 200 000 cars a year.

Scott Schermerhorn, chief investment officer with Granite Investments whose largest investment position is in GM stock said: "Getting rid of Chevy seems to be a little about-face for them. They talked about a global brand, which is led by Chevy but, given the state of the market, focusing on the brands that sell well and no longer trying to swim upstream in growing the Chevy brand over there makes sense."

While RBC Capital Markets analyst Joseph Spak described the decision as "flip-flopping" that nonetheless made sense, one investment banker said it was about time GM threw its support completely behind Opel, given the brand's heritage.

"It's been a long time and a waste of a lot of money to come eventually to the right decision," said the banker, who requested anonymity.

'GREAT FOR OPEL'

GM almost sold Opel in 2009 before deciding the 151-year-old brand was too important to its business.

NordLB analyst Frank Schwope said the decision to drop the Chevy brand was great for Opel and likely to ease some of the pressure on a European market suffering from overcapacity.

"GM hopes Chevy customers will now migrate to Opel," he said. But he raised the possibility that they might instead buy other value brands such as Dacia and Hyundai.

GM's decision will also be felt in South Korea, where the company produces most of the Chevrolet vehicles sold in Europe. Those exports reached 186 000 in 2012.
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