General Motors To Invest $5.2 Billion In Opel By 2016

General Motors To Invest $5.2 Billion In Opel By 2016

General Motors Company (NYSE:GM) chairman and CEO Dan Akerson reaffirmed his commitment to the company’s European subsidiary Opel during his visit to Opel headquarters. The automaker pledged to invest $5.2 billion (4 billion euros) by the end of 2016 to revive the loss-making brand.

General Motors To Invest $5.2 Billion In Opel By 2016

The U.S. auto giant estimates a slight improvement in its European sales this year, but the unit would still suffer losses for the 14th consecutive year. Car sales in Europe have declined to their lowest rate in two decades.

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General Motors Company (NYSE:GM) has been searching for strategies to turn around Opel which has lost over $16 billion in the past 13 years of continuous loss.

There were speculations that the company might sell Opel entirely or shift Opel assets from its own balance sheet to a joint venture with PSA Peugeot Citroen, but Akerson reaffirmed that Opel’s parent company cannot afford to part ways with it.

Many analysts have suggested selling Opel as the best solution. “Opel is key to our success and enjoys the full support of its parent company,” Akerson said.

General Motors Company (NYSE:GM) board met at Opel’s headquarters in Ruesselsheim to discuss the difficulties faced by the European auto industry and to examine Opel’s turnaround plan called “DRIVE!2022.” Last year, operating losses at the company’s European division widened to $1.8 billion from $700 million in 2011. The company expects to return to the profit zone after 2015.

General Motors Company (NYSE:GM) announced the revival plan a few months after ex-Volkswagen AG (PINK:VLKAY) (ETR:VOW) (FRA:VOW) executive  Karl-Thomas Neumann was appointed as the CEO of Adam Opel AG. It was the decision of General Motors Company (NYSE:GM) vice chairman Stephen Girsky who has been given the responsibility to design the turnaround strategy.

A large part of $5.2 billion will be used to launch 23 new Opel models and 13 new engines over the next three years.

The European car market is declining at an alarming rate. New car registrations were down 9.5 percent in the first two months of this year, according to European Automobile Manufacturers Association.

General Motors Company (NYSE:GM) shares were up 2.32 percent to $28.17 at 12:14 PM EDT.

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