GENEVA – Adam Opel GmbH CEO Nick Reilly foresees near-term profitability for General Motors Co.’s German auto making division, but the executive is skeptical an agreement can be reached to keep open a vehicle assembly plant in Antwerp, Belgium.
“The reality of life is there is overcapacity in Europe; overcapacity in Opel,” Reilly tells journalists at the auto show here.
“We can produce significantly more cars even without the Antwerp plant. If we don’t (close the plant), we won’t have a future. I believe people will come to realize that and we’ll settle our differences.”
Reilly is empathetic to union concerns about the elimination of jobs.
“The union is never going to just say, ‘We are happy with closure of a plant.’ We aren’t either,” he says. “We are happy to listen to anyone who has ideas. We’ve been through all the ideas we can think of. None of them are financially or economically viable. We have to make some tough decisions. We’re still in that phase.”
There are no plans to close other Opel manufacturing facilities, Reilly says.
Opel’s press conference here coincides with GM’s announced plans to contribute By Tom Murphy €1.9 billion ($2.6 billion) as part of its commitment to the Opel/Vauxhall viability plan, more than tripling the company’s previous investment pledge of €600 million ($819 million). The contributions will consist of both equity and loans.
As part of its viability plan, Opel had said it needed €3.3 billion ($4.5 billion). In addition to GM’s funding, Opel is requesting loan guarantees from European governments of less than €2 billion ($2.7 billion). GM’s commitment removes any potential liquidity risks for the auto maker this year, Opel says.
Asked how dire Opel’s cash position is, Reilly says, “After today, I wouldn’t describe it as dire. We clearly have the funding we need to continue investing in the product, to continue our restructuring and to get through this year, which we don’t anticipate being very good because the market is still weak.”
Europe’s market weakness poses the greatest risk to Reilly’s goals of breaking even next year and reaching profitability by 2012, says Tim Urquhart, an analyst with HIS Global Insight in London.
Aggressive scrappage programs last year pulled ahead millions of new-vehicle sales, and poorer European Union countries are struggling to come out of the global recession. “I’d say it is pretty optimistic,” Urquhart tells Ward’s. “Unless (Opel) markedly increases productivity, they won’t get that far into the black.”
Negotiations between Opel already have dragged on too long, he adds. “They need to resolve these issues as quickly as possible and stop messing about.”
Reilly says Opel is not seeking government money, but rather guarantees the auto maker can take to commercial banks to obtain loans. However, Opel would accept a direct loan from a European government if for whatever reason it was offered.
“We are assuming we do conclude some discussions with the governments on guarantees in the same way many other European companies in the auto industry have agreed for guarantees on loans,” he says.
“Even outside Europe, in Japan, governments have helped their local companies. There is a framework for this in the EU, and we’d like to avail ourselves of that.”
The U.K., Spain and Poland have been receptive to the idea of government assistance for Opel but talks with the home country of Germany, which has more jobs to lose than other European nations, have dragged on.
“The process in Germany is quite a long one,” Reilly says. “We’ve only started getting into the details with them. They’ve sent us questions we are answering this week. We’ll have detailed discussions over next two to three weeks.”
Government aid is one piece of the plan to save Opel, but equally important is innovative new products, such as the Ampera extended-range electric vehicle – being shown here and launching next year – sharing Chevrolet Volt architecture to boost fuel efficiency.
“That Ampera is really historic,” Reilly tells journalists. “We will also go through restructuring, which we need to do to reduce cost and our breakeven point. It will be done over the next three to four months. Then we will be in very good shape to face the future.
“Assuming the market gets a little bit stronger than it is now, we should be back into profits fairly soon.”
In addition to the Ampera, Opel also unveils in Geneva:
- The Flextreme GT/E concept, designed to introduce extended-range EV technology to midsize and large cars. The aerodynamic vehicle is capable of a top speed of more than 124 mph (200 km/h).
- The all-new second-generation Meriva compact monocab utility vehicle, with a roomy cabin and “FlexDoors” with front hinges for the front row and rear hinges for the back row.
- The Re-engineered Corsa small car with more power, better handling and improved fuel efficiency.
Asked if Opel plans to produce any models in South Korea, Reilly says the auto maker is “looking potentially at a small SUV, which we haven’t definitely agreed on.”
With regard to interest in producing GM Daewoo Auto & Technology Co.’s Korean vehicles in Europe, Reilly says it is possible, “potentially in Russia. We have already started doing that. We have no plans to do it in Germany yet, but there is no reason why we can’t produce those products in our plants in Europe.”
For the U.S. market, Opel soon begins shipping the Insignia sedan, to be badged as the new Buick Regal, until North American production begins next year in Canada.
Reilly sees additional opportunities to export engineering expertise from Opel’s technical center in Russelsheim, Germany, to the U.S. However, it’s less likely European Opel vehicles will be exported there.
“The euro’s pretty strong, and it’s quite difficult to make a lot of money,” he says. “But the products, themselves, could well be coming from here (Europe) and produced in the U.S.”
Opel has faced a tenuous future after losing money for years. GM struck a deal last year to sell the unit to Canadian supplier Magna International Inc. and Russian investment partner OAO Sberbank, but the deal fell apart in November when GM decided it wanted to keep Opel.
Asked if Opel can be a strong brand globally in the future, Reilly says the auto maker intends to try.
“It’s a lot of investment starting a brand in a new market,” he says. “We will do it market by market and focus on the markets Opel is already in outside Europe – China, for example. Yes, I think the products we’re showing today are very salable in many overseas markets."
– with James Amend