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The Deal: GM Gains on Brighter Outlook for European Unit

The Deal

NEW YORK (TheDeal) -- General Motors Co. this week reported earnings that revealed a surprising improvement in Europe, raising hopes the automaker's long restructuring efforts on the Continent are starting to show real success.

Detroit-based GM's European business has been bleeding cash for 13 years. While GM did lose another $175 million in Europe for the first three months of 2013, that loss was less than half of what analysts had expected, and dramatically better than the $462 million loss that rival Ford Motor Co. was forced to absorb on the continent for the same period.

Overall, GM reported an $865 million profit on sales of $36.9 billion, as the company continued its turnaround following a 2009 government-assisted bankruptcy. Even as GM has shown steady improvement elsewhere, its European unit has remained an albatross, but the company now says it expects to be break even in the region midway through this decade.

"The year is off to a solid start as we increased our global share with strong new products that are attracting customers around the world," GM Chief Executive Officer Dan Akerson said. "In addition, we saw progress in Europe thanks to strong cost actions and great vehicles like the Opel Adam and Mokka."

GM gained 3.2% to close Friday at $32.10 extend its 2013 advance to 11%. Ford also rose 3.1% to $13.83 to extend its gain this year to 6.8%.

But even with the success of those new vehicles it is not smooth sailing for GM in Europe, a region where economic hardship and declining rates of auto ownership have all automakers scrambling to cut costs and reduce capacity. Akerson last month committed to invest ¿4 billion ($5.3 billion) in the company's Adam Opel AG European operations to support the unit's recovery, and weeks later finalized plans to close a plant in Germany after GM was unable to win worker approval for a wage freeze.

GM has had a shaky relationship with Opel in recent years. The automaker had planned to sell Opel during the parent's 2009 restructuring, but reversed course and instead committed to spend an initial ¿3.3 billion to restructure the business.

That decision has been criticized in years since as the company has continued to struggle in Europe. Some analysts have suggested GM should eventually revisit the Opel decision, hopefully finding a buyer for the European operation and in its place marketing Chevy vehicles manufactured elsewhere in the region.

The improving results in Europe, should they continue, will ease the pressure on Akerson whether GM ultimately decides to keep Opel in-house or put it on the block.

Written by Lou Whiteman in New York

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