General Motors Co. (NYSE: GM) has lost$16 billion on its Opel/Vauxhall division in the last dozen years, and the company may lose even more in the next dozen according to an analyst at Morgan Stanley. The best course for GM to follow would be to cut its losses and sell the Opel division before the losses mount even higher.
Still, selling the division won’t be cheap. Morgan Stanley’s analyst puts the the cost to GM at around $13 billion, which includes restructuring costs, an equity contribution to the buyer, and GM’s pension obligations to Opel. GM sees the situation differently:
“Despite the tough environment for the automotive business in Europe, we believe we have an opportunity to turn the Opel/Vauxhall business around and bring it back to long-term profitability,” GM spokesman Jim Cain said.
Last week GM announced last week that it had reached a deal to cut hours at two of its plants in Germany.
GM had a deal in the works for Opel in 2009, but refused to pull the trigger. Now the U.S. automaker probably wishes it had a second chance at such a deal. GM could have a long wait.
GM stock is up 4.4% today at $22.72 in a 52-week range of 18.72-$27.68. The share price rise is likely due to hope for a recovery in the Eurozone economy following today’s ECB decision.
Paul Ausick
Get Ready To Retire (Sponsored)
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
