GM Europe, launching Cascada, hopes for profits

GLIWICE, Poland – General Motors’ chronic European loss-maker Opel, launching its new Cascada convertible, said it expects to make decent profits by the end of the decade.
Opel, and its British counterpart Vauxhall, lost $1.8 billion last year, expects to do a little better in 2013, and has a target of breaking-even by mid-decade. Before 2012, Opel-Vauxhall lost $16 billion in 12 years, prompting some investment bankers to say GM’s task was hopeless and it should cut its losses and shut down its European operation.
“We expect profits (for Opel-Vauxhall) mid-decade and a reasonable return on investment towards the end of the decade,” said Steve Girsky, GM vice-chairman and GM Europe president.
Girsky didn’t elaborate on the level of profits during his presentation of his “Drive! 2022” plan for Opel-Vauxhall. Girsky is currently negotiating with unions for an agreement, which will take on board his reorganization plans, already including the shutting of a plant in Bochum, Germany.
Some commentators have suggested GM should shut one more plant in Germany, the Eisenach factory, which would leave Ruesselsheim as the only manufacturing facility in Germany. Rumors have persisted, and been denied, that GM would merge with its French partner Peugeot, which lost even more money than Opel-Vauxhall in 2012.
Industry experts are skeptical of Opel-Vauxhall’s future, as sales plunge in Western Europe, and all the big mass market manufacturers domiciled outside of Germany scramble for scraps left by market leader Volkswagen’s relentless increase in market share.
Investment bank Morgan Stanley analyst Adam Jonas has said GM should dump Opel, which he described as the best strategic option available to GM.
Professor Ferdinand Dudenhoeffer of the Center for Automotive Research says Opel-Vauxhall hasn’t done enough yet to cure its problems, and it should learn from Ford Europe.
“It remains a tough job to bring Opel back to profit. They’ve got a capacity problem and Ford Europe has shown the world how to solve it. It’s not the product that’s the problem, it’s GM management,” Dudenhoeffer said.
Ford Europe lost almost as much money as Opel-Vauxhall in 2012, but has already announced plans to shut three plants.
But Girsky was adamant in his presentation that Opel-Vauxhall would survive, and thrive. Girsky hinted that spare capacity in European plants might be taken up by producing Chevrolets which are currently made in Korea.
“We sell a million cars (a year) in Europe so we should be able to make this work,” Girsky said.
Girsky said the Opel-Vauxhall turnaround would be something to behold.
“This will be the most successful comeback in Europe’s automotive history,” Girsky said.
At the Gliwice plant in Poland’s Silesia district today, Girsky drove the first Opel-Vauxhall Cascada convertible off the production line. Girsky said the car is good enough to compete with premium products like the Audi A5, and said it might also be sold in the U.S. The Cascada, which means “waterfall” in Spanish, will make its debut at the Geneva car show next week.