Bloomberg News

GM’s Opel Plans 5% Margin by 2022 in Carmaker Turnaround

June 04, 2014

General Motors Co. (GM:US)’s Opel plans to boost market share and earnings within the next eight years as part of a turnaround effort at the car brand.

Opel is targeting an 8 percent share by 2022 in Europe, including Russia and Turkey, compared with the current 5.8 percent, said Karl-Thomas Neumann, who heads the unit. The nameplate is also aiming for a 5 percent operating margin by that time. The first-quarter loss was $284 million.

“I’ve got a lot of confidence that we can reach these targets sustainably,”Neumann told journalists yesterday at a dinner event in Kronberg, Germany.

Opel and its U.K. sister unit Vauxhall will revamp their lineup with 27 new or updated models through 2018 in an effort to win customers and become Europe’s second-largest car brand by sales by 2022, after Volkswagen AG (VOW)’s namesake marque. The GM divisions together rank third in the region’s auto deliveries, behind VW and Ford Motor Co. (F:US), according to the ACEA trade group.

GM is deepening Opel’s integration into the Detroit-based parent company’s manufacturing network and sharing more technology and underpinnings across brands to reap economies of scale that are critical to Opel’s turnaround strategy.

“We’re working intensively on our product costs and bank consequently on the global structures of GM,” Neumann said.

Recall Response

GM is revamping its internal organization in response to recalls affecting 14 million cars in the U.S. this year, “triggering deep, fundamental changes” to identify quality flaws as soon as possible and take action immediately across the company, Neumann said. “We can all learn from this.” Only 7,000 Opel cars have been affected by the recalls so far.

The U.S. carmaker is sticking to an interim goal of returning to profitability in Europe by mid-decade after losing more than $18 billion there since 1999. Opel, based in the Frankfurt suburb of Ruesselsheim, is closing a plant in Bochum this year, the first auto factory to be shuttered in Germany since World War II. To boost sales, it’s refreshing the compact Corsa model after adding the Adam city car and Mokka small sport-utility vehicle to the lineup.

The European unit may also introduce a subcompact model below the Adam and is considering building a sporty vehicle based on the Monza concept car, Neumann said. Its Zafira and Meriva minivans may be redesigned to make them look more like crossover vehicles, he said.

Market Share

Opel’s and Vauxhall’s joint market share in Europe expanded to 6.7 percent in the first four months of 2014 from 6.6 percent a year earlier. VW-brand sales accounted for 12.1 percent of the market in the period, down from 12.5 percent, while Ford’s share widened to 7.5 percent from 7.2 percent.

GM, which fell to third place in global auto sales when Volkswagen overtook it in group deliveries last year, has been reorganizing brands worldwide to focus on its strongest regional offerings.

Opel is pulling out of China next year after failing to gain traction over the last two decades in the market, now the world’s biggest. In December, GM said the Chevrolet division will stop selling vehicles in Europe, and outlined plans to shut the Australian nameplate Holden by 2017.

Opel will continue to manufacture some cars in Europe for export to help improve factory utilization, Neumann said. It will start assembling the Mokka in Saragossa, Spain, at the end of this year, after importing the model from GM’s operations in South Korea.

A sale of Opel to Canadian auto-parts producer Magna International Inc. and Russian partner OAO Sberbank was among options that GM considered as the U.S. company struggled to restore group profitability during the global recession in 2009. GM, which has controlled Opel since 1929, chose instead to keep the business and reorganize it.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net Tom Lavell


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