GM’s European Subsidiary Opel-Vauxhall Wins Barra Approval
“I want to restate the importance of Europe for GM “
FRANKFURT, Germany – General Motors’ European subsidiary Opel-Vauxhall, long a financial basket case with a questionable future, is now looked upon favourably by its Detroit masters as a key element in its plans.
GM CEO Mary Barra, in Germany for the biennial car show here, declared Opel-Vauxhall an important resource. She was asked at a press conference, given that Opel-Vauxhall had lost $18 billion since 1999, why hang on to it.
“Europe is an important market and a leader in technology. We need to be present in Europe and win in Europe. Not only will (Opel-Vauxhall) break-even next year, but the 2022 plan stands too,” Barra said.
Barra was attending her first European show since taking up the CEO job in January 2014.
Opel-Vauxhall – Opel sells cars in mainland Europe and Vauxhall sells the same vehicles with its brand in Britain – narrowed losses in Europe to $45 million in the second quarter from last year’s $305 million second quarter loss. The company has a long-term plan – Drive 2022, which includes EBIT (earnings before interest and tax) of five per cent with European market share of eight per cent, up from 5.8 per cent in 2013.
The break-even in 2016 target was thought to be in jeopardy because of a loss of sales in Russia. Opel-Vauxhall recently withdrew from most of the Russia market because of the economic and political turmoil there. GM Europe president Karl-Thomas Neumann told the press conference despite this Opel-Vauxhall had been able to increase market share.
“I want to restate the importance of Europe for GM. I would say the relationship (with Opel-Vauxhall) was the strongest it has ever been. We all recognize the importance of Europe and we are only going to win with a strong Opel brand. The technical centre is here too. I want to leverage our strengths in Europe,” Barra said.
GM Europe launched the new Astra family sedan at the car show. The Astra will offer gasoline and diesel engines ranging from 99 hp to 197 hp. The company is making a big deal about the high-level of content being offered, which includes OnStar communications familiar to U.S. car buyers, and the new generation IntelliLink infotainment system that is compatible with Google’s Android Auto and Apple’s CarPlay. Other technology options include Lane Departure Warning, Collision Alert with Collision Imminent Braking and Advanced Park Assist. Even the seats offer a massage function, while rear passengers can also look forward to more comfort with heated seats. An advertising campaign for the Astra is full of references about its “luxury” content, “luxury headlights” and “upsets the luxury class”.
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) at the University of Duisburg-Essen, thinks the Astra will do well.
“First, the Astra and its advertising campaign looks very interesting. The new Astra also has a lot of very favorable (media) tests and comments. So, Opel has the chance to win (market) shares against the VW Golf and Ford Focus. Further, Ford is not very creative in its marketing. Therefore, Opel has the chance to win further from Ford,” Dudenhoeffer said.
The VW Golf is Europe’s biggest selling car, with Western European sales of 275,848 in the first half of 2015, according to industry data specialists JATO Dynamics.
During the press conference, Barra was asked if GM had received any recent calls from FCA CEO Sergio Marchionne, who has sought a merger.
“No,” said Barra. “We didn’t think the proposal was the right thing for GM shareholders. “We looked at it very carefully and in tremendous detail and decided it’s not in the best interests of GM Shareholders,” Barra said.
Questioned about the state of the European market, GM Europe’s Neumann said it was growing, but only slowly mainly due to the impact of Russia. “It’s growing, but it is disappointing because we thought it would grow more. Russia has taken away a lot, but we are still on a 10 year low and there’s lots of room to make up. There are positive signs and I’m very optimistic,” he said.
CAR’s Dudenhoeffer agrees.
“The European market will further improve next year. Not so strong like this year, however, southern Europe still has some potential,” Dudenhoeffer said.
IHS Automotive expects car sales in the E.U to increase more than six per cent in 2015 to almost 13.3 million.
This will help Opel-Vauxhall’s drive to finally get out of the red next year.
“Both points can offset Russia. Thus, the conditions to become profitable next year become more and more realistic. I think Opel will manage to be profitable in 2016,” Dudenhoeffer said.