General Motors CEO Dan Akerson sees trouble brewing for the U.S. economy, and the eurozone financial crisis is to blame. Before the Detroit Economic Club, Akerson painted a bleak picture that he considers to be “much more serious” than when the U.S. credit bubble burst in 2008, reports the Detroit Free Press.
Dominoes poised to fall
Akerson questioned not whether a collapse of the eurozone will be bad for the U.S. economy – and by extension, the U.S. automotive industry – but exactly how bad it will be. Global stock markets have already felt the effects of the eurozone crisis, and the ripples have sent GM’s stock down more than one-third since the automaker’s initial public offering in November 2010.
In the third quarter of 2011 alone, GM’s European division lost $292 million. This prompted the automaker to backtrack on its previous prediction that it would break even on the European continent in 2011.
Over the first nine months of 2011, GM Europe accounted for 18.2 percent of the automaker’s global revenue.
“It’s the unknown” that concerns Akerson. “I will tell you that Europe is a hugely important cultural center of gravity.”
Will GM shut down European operations?
Currently, the U.S. Treasury still owns 26 percent of General Motors. Plus, GM’s stock price remains low, which means the government is unlikely to reduce its stake, according to the Free Press The problems the European market has presented for the automaker raise the question of whether GM will pull out of Europe entirely.
Akerson is not bereft of optimism, however.
“Our stock has performed better than some of our competitors – our domestic competitors,” he said, in reference to Ford’s 39 percent stock drop over the past year. “But that is kind of like saying, ‘Who is the tallest midget?’”
If GM continues to aim toward building the best cars possible, Akerson believes that profit margins will improve. Build a quality product, and they will come.
“Ultimately, we’ve got to be profitable around the world,” he said. “Our (profit) margins are not what they should be.”