Europe

GM's New Opel Boss Gets Chance to Shine


By Seonjin Cha and Chris Reiter

(Bloomberg)—Nick Reilly took over at Adam Opel GmbH in Germany five days after 10,000 people demonstrated against General Motors Co.'s ownership of the unit. It wasn't the first time GM had asked him to win over protesters.

Reilly, 59, became acting head of Opel on Nov. 10 after GM scrapped a sale of the Ruesselsheim, Germany-based unit to Magna International Inc. Unions had backed the deal as workers would get a 10 percent stake. GM's acting Chief Executive Officer Ed Whitacre made the appointment permanent on Dec. 4.

To turn Opel around, Reilly, a 34-year GM veteran, has to persuade workers to give up 265 million euros ($394 million) in annual pay and get seven European Union countries to provide 2.7 billion euros of support. He also has to stem a 9.6 percent slump in sales of Astra and Corsa cars as the automaker is set to run out of cash by March.

Fixing the carmaker is "all about regenerating team spirit and a determination to win," Reilly said in an e-mail response to questions. Opel has "a very robust product portfolio."

Reilly, who previously managed all of GM's international operations from Shanghai, oversaw the carmaker's 2002 purchase of South Korean plants in a deal also opposed by unions. As head of GM Daewoo Auto & Technology Co., he more than tripled annual sales to 1.5 million vehicles by the end of 2006. The unit, built from a formally bankrupt carmaker, now accounts for about 20 percent of GM's global production.

Opel Job Cuts "GM counts on Reilly to be one of the leaders to turn around the whole company," said Michael Dunne, president of consultant Dunne & Co. and ex-head of J.D. Power & Associates in China. "His appointment to make sure the Opel deal works is an indication of how much confidence GM has in him."

At Opel, Reilly expects to cut about 8,300 jobs under an almost-completed turnaround plan, he said in a Dec. 5 conference call. Success will require developing a new "mini" car, as well as hybrid and gas-powered vehicles, he said.

The unit has been losing market share since the mid-1990s, "due to cheap manufacturing and cheap parts, hurting its reputation" said Christoph Stuermer, an analyst with research firm IHS Global Insight in Frankfurt. If Reilly thinks "it's a problem of scale—selling more cars and saving a bit more—then he doesn't understand the structural problems."

This year, Opel's sales have contracted at almost double the pace of the 5 percent decline in the overall market this year, according to the European Automobile Manufacturers' Association. The carmaker has lost market share to Volkswagen AG, Ford Motor Co. and Fiat SpA even as government incentives in Germany, the U.K., France and Italy boosted demand for its bread-and-butter small cars.

'Refreshingly Pragmatic' U.K.-born Reilly will have to win backing for a 3.3 billion euro turnaround from countries including Germany, the U.K. and Spain, which house plants making Opel or Vauxhall cars. Detroit- based GM is putting in 600 million euros.

"Reilly seems refreshingly pragmatic," said Hendrik Hering, economy minister of the Germany state of Rhineland- Palatinate, where Opel employs 3,200 staff. "He has gathered experience in turning companies around and what also helps is that he's European."

Reilly was GM's European vice president for sales and marketing, based in Zurich, before moving to Korea. He also ran Vauxhall in the U.K. and worked in the U.S., Mexico and Belgium.

To win support from Opel's 50,000 workers, GM may give staff a stake and agree to profit-sharing, Reilly told reporters on Dec. 4. Reilly took over at Opel from Carl-Peter Forster after GM canceled a sale of the unit to Aurora, Ontario-based parts-maker Magna and Russia's OAO Sberbank.

GM CEO? "GM realized that things need to be straightened out," said Klaus Franz, a union leader, who met Reilly on his first day at Opel over coffee at the unit's headquarters. "He seems like a person that can stand up for his own opinion, even within GM."

Reilly's move to Opel, after serving as Asia-Pacific chief from 2006, and head of all operations outside of North America from July, has led to speculation he could be a candidate to succeed Fritz Henderson and Whitacre as GM's CEO.

"He'd have to be among the people being looked at," said George Peterson, president of AutoPacific Inc., an industry consultant in Tustin, California. "He was groomed for the position with the role he had in Asia."

Still, Peterson said a "dark horse candidate" seemed likely. Several GM directors favor appointing an outsider, according to a person familiar with the situation.

Mountain Hike In Korea, Reilly built relations with workers through moves including hiking up Mount Bongcheon, west of Seoul, with a union leader to perform good luck rituals, according to his Korean- language memoirs, "CEO Nick Reilly, Passion" (Hans Media, 2007). The University of Cambridge graduate also often sang in karaoke bars with colleagues and reporters.

"He certainly differentiated himself from former Korean managers and actively communicated with workers," said Kim Yun Bog, a spokesman for GM Daewoo's labor union.

Reilly helped revived sales at Daewoo by introducing new or revamped models, such as the Tosca sedan and Matiz compact, and the unit became GM's global hub for developing small vehicles and minicars.

"Reilly's proven himself after successfully reconstructing Daewoo," said Lee Jin Sik, a Seoul-based analyst at CSM Worldwide Inc. "He may be the perfect troubleshooter to deal with the chaotic situation at Opel."

To contact the reporters on this story: Seonjin Cha in Seoul at scha2@bloomberg.net; Chris Reiter in Berlin at creiter2@bloomberg.net

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