Europe could be a challenge for incoming GM CEO

As incoming CEO Mary Barra prepares to take the reins at General Motors Co., her biggest challenge will be to accelerate the turnaround of the automaker's European business.

An analyst report last week estimated that European business represents a negative value of $11.5 billion on the company's balance sheet.

That's better than the previous estimate of minus $16 billion, according to Morgan Stanley's report, but it serves as a stark reminder that the company's legacy in Europe poses obstacles even if GM breaks even on the continent by mid-decade.

"GM Europe is a source of near-term earnings momentum, yet still a source of long-term risk," Morgan Stanley's Adam Jonas wrote in a research note.

The report comes about a week before Barra is to succeed CEO Dan Akerson, who is retiring to help his wife, Karin, fight cancer.

GM has lost money in Europe every year since 1999. Although it has cut costs and new products to boost revenue, the losses are expected to continue in 2014.

When GM announced its leadership changes last month, the automaker said that Vice Chairman Steve Girsky would relinquish his role as the chairman of the automaker's European turnaround efforts. But GM Europe President Karl-Thomas Neumann will stay in place.

The company announced plans last month to shrink its partnership with Peugeot Citroen and sell off its 7 percent stake in the French automaker after Peugeot tightened ties with Chinese automaker Dongfeng Motor.

GM also decided to withdraw Chevrolet from Europe to place more firepower behind its Germany-based Opel brand.

Jonas estimated that the decision to extricate Chevy from Europe would "have a four-year payback," although it costs $900 million upfront.

At one point last year, Morgan Stanley suggested that GM should consider selling its European business, even though it would probably cost billions of dollars to do so. But Jonas said that option appears to be "off the table, at least this cycle."