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GM CEO Barra stands by target to return to profit in Europe in 2016

GM CEO Barra stands by target to return to profit in Europe in 2016

General Motors stands by its target to return to profit in Europe in 2016, CEO Mary Barra said. The company remains committed to the mid-term targets it has set for its Opel/Vauxhall unit, Barra told reporters on Thursday.

After a turbulent year for GM dominated by a scandal over safety recalls, Barra said she is “cautiously optimistic” about 2015. She cited strength in the United States and China, and said GM will have to adjust to “twists and turns” in other markets, including Europe.

GM’s third-quarter loss in Europe in 2014 widened to $387 million from a $238 million loss. Opel/Vauxhall deliveries rose 3 percent in Europe last year to 1.08 million cars. The brands’ combined market share in the region rose by 0.1 percentage points to 5.74 percent, the highest level since 2011. Opel/Vauxhall has targeted a market share of 8 percent in Europe by 2022.

Barra’s stance on Europe is in contrast to U.S. rival Ford Motor, which last autumn cut its outlook for the region due to steeper losses in Russia. Ford’s third-quarter pretax loss in Europe widened to $439 million from $182 million. The company has said it will not achieve its previous target to turn a profit in Europe this year.

Arndt Ellinghorst, head of automotive research at Evercore ISI, said lack of profitability at Ford of Europe and GM Europe is caused by poor transaction prices.

The automakers build high quality, well-engineered cars in Europe that are competitive with Volkswagen and some smaller cars from Audi, BMW and Mercedes-Benz, he said, but their brands are not strong enough to attain the pricing necessary to drive profitability.

GM will need to achieve its goal of a variable profit improvement of $900 on the recently introduced Opel Corsa and $1,250 on the new Astra, which arrives at the end of the year, to achieve its profit goals, Ellinghorst said in a research note today.