Chronic problems at General Motors Company (NYSE:GM)’s German subsidiary, Adam Opel AG, have cost the giant automaker $18 billion in losses since 1999. Another $2 billion or so in losses is likely in 2013.
General Motors Company (NYSE:GM) CEO Dan Akerson has been determined to overhaul Opel and turn it into a sustainably profitable business for the long haul. One part of his plan to put Opel back in the black involves finding ways for Opel’s sales volumes to grow.
But how will Opel find growth when new-car sales in Europe are at their lowest levels in decades?
Looking east for big sales growth
In an interview that ran over the weekend, Akerson told German newspaper Bild am Sonntag that Opel will push exports to Turkey and Russia in an effort to find new growth for the old German brand.
While the mature car markets in most of Europe are mired in recession, Turkey and Russia represent markets that aren’t yet fully mature – and in the case of Russia, one that could see significant growth in the next few years.
Akerson, echoing recent comments from Ford Motor Company (NYSE:F) executives, told Bild that “in a few years time” Russia’s new-car market could be bigger than Germany’s, currently Europe’s largest. That’s why General Motors Company (NYSE:GM), like its global-minded rivals Ford and Volkswagen AG (ADR) (PINK:VLKAY), is looking to establish a strong foothold in Russia while the market is still in its early growth stages.
But growth in Russia’s car market has been slow recently, with sales flat so far in 2013. Russia doesn’t yet have the infrastructure to support mass ownership of cars. Many roads and bridges are poorly maintained. Lots of Russians still find it easier to take a train to work, as they have for years. But Russia’s vast natural resources wealth means that the potential for the country is still huge.
For Opel’s sake, General Motors Company (NYSE:GM) is certainly hoping that that potential starts to be realized soon, because it’s unlikely to find much growth in its traditional markets any time soon.
Why Europe’s car industry is in such trouble
When it comes to new-car sales in most of Europe, things are really bad right now.
European new-car sales hit a 17-year low in 2012, and most automakers doing business in the region have seen further declines so far in 2013. Europe’s car industry has big problems, starting with this one: Deep recessions driven by government austerity programs in many European nations have led consumers to shy away from new-car purchases for the time being.