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GM Europe On Target For Profit By 2016

Will Add Onstar Communications System To All Vehicles.
Market Share Decline Arrested.

GENEVA, Switzerland – General Motors is on target to stop its European Opel-Vauxhall brand’s long-term loss-making by breaking-even in 2016.

In a wide-ranging presentation on the Opel stand at the Geneva car show, GM Europe president Karl-Thomas Neumann said the joint ventures with Peugeot-Citroen would still bring advantages, although GM had decided to sell its seven per cent stake in the French company.

Neumann said Opel-Vauxhall would add the U.S. OnStar communications systems to every new car by 2015 and use connectivity to appeal to a wider range of customers.

“We are on target to break-even by 2016,” Neumann said, “and although we lost money last year, it was still better by more than 60 per cent, and we stopped the fall in market share.”

In 2013, GM Europe lost $844 million, down from $1.94 million the previous year. It has lost around $18 billion since 1999.

In 2013 Opel Vauxhall sold 781,200 cars in Western Europe, a fall of 1.4 per cent in a market that fell 1.9 per cent. Market share rose to 6.8 per cent from 6.7 per cent.

Late last year, GM Europe announced it would withdraw its Chevrolet brand from Europe at a cost of $900 million.

Investment bank Morgan Stanley expects Opel-Vauxhall to lose $844 million this year, and agrees that profits are in sight for 2016, with a 0.8 per cent margin. Morgan Stanley sees a long-term prospect of a negative one per cent margin.

Not happening
Morgan Stanley has been a consistent advocate for GM ridding itself of Opel Vauxhall, but now concedes that this isn’t going to happen any time soon.

GM was close to pulling out in 2009, but it spiked a deal to sell Opel to Magna International in a package engineered by the German government. GM Europe has been restructuring and has announced the closure of one plant in Bochum, Germany. Last year it announced a $5.25 billion investment plan through 2016 to develop 23 vehicles and 13 engines.

 At the meeting today Neumann reiterated GM’s determination to stick with Opel Vauxhall.

 “We can’t give up Europe if we want to be a global player,” Neumann said. “We are going to concentrate on Opel (Vauxhall) and do it right,” he said.

Neumann said Opel-Vauxhall would add OnStar communications to all but its cheapest vehicles by 2015. This would create new customers and because of the systems, which include safety, internet access, stolen vehicle tracing, navigation and restaurant finding, it would be a big business opportunity.

The scaled down cooperation with Peugeot-Citroen would still pay off in areas like logistics and purchasing. Together the companies will still produce three vehicles, including versions of the Zariva and Meriva minivans, and a commercial vehicle. The original deal had called for the production of small car.

Would Opel-Vauxhall seek to export cars out of Europe?

“Not in big numbers although we won’t turn down any sales. But our turnaround must take place in Europe. There’s no reason why we can’t win market share. That is the goal for this year,” Neumann said.

“We want to be the 2nd largest brand in 2022, we’re now third, in Europe and for that we need additional product. We will be looking at crossovers (SUVs) and the lifestyle segment,” Neumann said, declining to elaborate.

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