GM to drop Chevy brand in Europe to focus on Opel

General Motors (GM.N) will drop the Chevrolet brand in Europe by the end of 2015 after it failed to build a significant market share, and focus instead on its Opel and Vauxhall marques in a drive to return to profit on the continent, Reuters reports.

The world's second-biggest carmaker behind Japan's Toyota (7203.T) said on Thursday the decision would result in one-off charges of up to $1 billion, but it should lead to production, marketing and distribution savings.

Relaunched in Europe in 2005, Chevrolets were supposed to compete at the budget end of the market with the likes of South Korea's Hyundai (005380.KS), Volkswagen's (VOWG_p.DE) Skoda and Renault's (RENA.PA) Dacia.

But the brand, by far General Motors' (GM) biggest in its home U.S. market, failed to make much headway as its largely rebadged South Korean-made Daewoo cars struggled against rivals, some of which are customized for European markets.

Hurt also by a brutal downturn in European demand, Chevrolet responded by slashing prices and introducing more upmarket models. But that put it on collision course with Opel and Vauxhall, leaving Chevy's sales making little progress at around 200,000 cars a year.

"It's great for Opel," NordLB analyst Frank Schwope said about the decision to drop the Chevy brand, with the reduction of Chevy cars likely to ease some of the pressure on a European market suffering from overcapacity.

"GM hopes Chevy customers will now migrate to Opel. But will they instead go off and buy other value brands like Dacia and the Koreans?" Schwope added, referring particularly to strong European demand for Hyundai cars.

GM's decision to drop Chevy in Europe, where the brand has around 1,900 dealers, will also be felt in South Korea, where GM produces most of the Chevrolet vehicles sold in Europe. In 2012, GM exported 186,000 Chevy-branded vehicles to Europe from Korea.

"We will phase out exports to Europe by the end of 2015. We will discuss with the union how to enhance the operating efficiency of our plants," GM Korea spokesman Park Hae-ho said.