This man wants to run General Motors

July 16, 2012: 8:33 AM ET

But first Steve Girsky will have to fix GM's badly broken European operations -- a disaster that has burned through $14 billion in a decade and claimed many executives before him.

By Doron Levin, contributor

Steve GirskyFORTUNE -- When Stephen J. Girsky was a Morgan Stanley equity analyst routinely criticizing General Motors' myriad shortcomings, executives at the Detroit automaker surely wondered how a Wall Street know-it-all might actually perform if he was in their shoes. They're about to find out.

The former analyst is taking command of GM's (GM) toughest business problem. Girsky, 50, is temporarily leader of GM's badly underperforming European operations, a far cry from issuing earnings forecasts. The GM vice chairman is looking for a successor to Karl-Friedrich Stracke, who stepped down after less than eighteen months on the job. Whoever Girsky finds to replace Stracke will be the fourth CEO in Europe in less than three years. Girsky has been serving since November as chairman of the automaker's European operations, including its Adam Opel auto-making unit based in Germany.

Europe is the dark cloud hanging over GM's otherwise remarkable turnaround since its 2009 bankruptcy. Despite rebounding U.S. sales and a healthy business in Asia, the company has lost $14 billion in Europe since 2000. Its vehicles have struggled for market share on the continent and in Great Britain, where they are sold under the Vauxhall brand. The vehicles they have sold can't command the higher prices of competitors like VW, BMW or Mercedes-Benz. And GM suffered, as have all European automakers, from lack of productivity and flexibility from European labor unions. No surprise, then, that Europe felled a raft of GM executives prior to Girsky. He could easily go the same way if he can't find a working strategy.

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GM Europe may be a colossal problem, but it's also a proving ground. Former GM CEO Fritz Henderson was making strides in Europe when he was called back to Detroit to solve even bigger problems prior to GM's 2009 bankruptcy. (Mark Fields, widely seen as Allan Mullaly's successor at rival Ford ran that company's European division before being made president of the Americas.) Michelle Krebs, a senior analyst with Edmunds.com, says that Girsky has been "gunning" to run all of GM. "Turning around GM's operations in Europe would be a huge step toward the throne," she says.

Fixing Europe is a tall order. Opel is at the heart of the problem. After two decades of reorganizations and personnel changes, the German brand is still just an also-ran that cannot compete with peers owned by Volkswagen, Daimler, and BMW. (GM has introduced its Chevrolet brand on the continent, but sales are miniscule.) Even worse, with Europe's economy in shambles, the continent is awash in excess capacity, calling for urgent closure of unprofitable assembly plants.

David Cole, chairman emeritus of the Ann Arbor, Michigan-based Center for Automotive Research, says the economic malaise in Europe gives GM the opportunity to make some changes. "So many other things are happening that the German government and unions may just have to acquiesce to efficiency measures," he says. That could cause workers to lose jobs.

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The latest team under Girsky's supervision didn't do him many favors. The best that Stracke could do is plan for more massive investment in new models. He also hoped to negotiate shutting down Opel's Bochum, Germany factory after 2016 -- something that has proven notoriously difficult and costly to do in the face of that country's powerful, coordinated unions. (Kicking the can down the road so long actually pleased Opel's union leaders, giving them four years to fight Bochum's closure.)

To make matters worse, GM Europe's alliance with a shaky PSA Peugeot-Citroen, announced in February, is looking stillborn. Major partnerships are in vogue at the moment -- Chrysler and Fiat, Nissan (NSANY) and Renault, Toyota (TM) and BMW -- as automakers attempt to slash costs and balance supply. In February GM announced it will buy 7% of Peugeot for 320 million Euros, hoping to trim the amount it spends on parts. But the French automaker is in serious trouble. The same day Stracke's exit was announced, Peugeot said it would cut 8,000 jobs and close one of France's biggest car assembly plants near Paris.

With problems this bad, one wonders if former GM CEO Henderson was right in 2009 when he favored selling European operations. Henderson was ultimately overruled by current CEO Daniel Akerson and others, including Girsky himself.

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What's certain is that Girsky has no margin to delay or dissemble. He has to rationalize capacity now, not in 2016. Some 25% of GM is still owned by the U.S. Treasury. In less than two years as a reorganized public company, the automaker has lost a third of its market value, partly due to a weak global economy. "Girsky is in a perfect position to be the bad guy, to get rid of capacity that GM doesn't need," says Cole. "Given everything else that Europe is facing, he may be able to fly under the radar" -- i.e. avoid a confrontation with the union's representing Opel workers and ultimately the German government.

One of GM's cultural failings has been indecisiveness and the maddening slowness with which its executives solve problems, especially the most dire ones. GM Europe is an open wound that is a drag on GM's overall recovery. Global competitors like Volkswagen and Toyota are getting stronger. If Girsky pulls off a turnaround -- many would likely support his elevation to GM CEO sooner rather than later. That would virtually make him a miracle worker, on par with what Carlos Ghosn was in the early 2000s when he led the rescue of Nissan.

If not, his career could end as have so many others at GM -- on European shoals.

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