GM to drop Chevy brand in Europe to focus on Opel

A challenging business model and the difficult economic situation in Europe are the reasons

General Motors will drop the Chevrolet brand in Europe by end 2015, and focus its resources on pushing its Opel and Vauxhall brands, the latest effort by the US carmaker to turn around its European operations.

The company's Chevrolet brand will no longer have a mainstream presence in Western and Eastern Europe, largely due to a challenging business model and the difficult economic situation in Europe, General Motors said on Thursday.

"We have growing confidence in the Opel and Vauxhall brands in Europe. We are focusing our resources in mainstream Europe," Stephen J. Girsky, Vice Chairman at General Motors, said on a call with journalists on Thursday.

Chevy's sales volumes in Europe have barely budged, hovering around 200,000 cars ever since GM relaunched Chevy in Europe in 2005. Hurt by a brutal downturn in European demand, Chevrolet responded by slashing prices and introducing more upmarket models - putting it on collision course with its sister brand Opel.

By shutting Chevy, General Motors expects to record net special charges of $700 million to $1 billion primarily in the fourth quarter of 2013 and continuing in the first half of 2014, Girsky said.

Of this amount, $300 million of net special charges will be non-cash expenses. These charges include asset impairments, dealer restructuring and severance related costs.

In addition, GM said it expects to incur restructuring costs that will not be treated as special charges, but will impact GM's international operations earnings in 2014.

The decision to drop the Chevy brand is not influenced by a partnership General Motors has with France's Peugeot , Girsky said.

"This is done independent of the PSA relationship," he said.

"Basically (we will) shut away the 1% share company in Europe. The financial results have been unacceptable," he said, referring to Chevrolet's market share in Europe.

Thomas Sedran, President of Chevrolet Europe, said, "Chevrolet's business results have been impacted by the unfavourable economic environment in Europe."