Why Girsky sees hope for Opel
Better image, higher prices, new models will contribute
 | Neumann: The next chief of Opel? |
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DETROIT -- Steve Girsky sees some hope for General Motors' European business.
Last week, GM's interim head of Europe outlined the reasons GM can reach breakeven on the troubled continent by mid-decade. GM expects $1.5 billion to $1.8 billion in European losses this year, after racking up more than $17 billion in losses there since 1999.
Girsky isn't counting on an economic comeback or market-share gains to hit that goal. Instead the focus will be on repairing the Opel brand -- which could lead to higher prices and more revenue -- as well as reducing its cost structure and excess production capacity.
"We've refocused our go-to-market strategy and are focused on improving the image of the Opel brand and strengthening the quality of the market share," Girsky said.
Girsky may have found the leader he needs: Karl-Thomas Neumann, 51, Volkswagen manager and former Continental AG CEO, will become head of Opel, Financial Times Deutschland reported last week, citing industry sources. An Opel spokesman declined to comment.
Since July, restructuring consultant Thomas Sedran has been Opel's interim CEO.
Girsky noted several "green shoots" that give him hope that GM's turnaround timeline can be achieved:
• GM already has taken more than 40,000 orders for the Mokka compact crossover, and the Opel Adam minicar shown at the Paris auto show in September was a hit, Girsky says. Both vehicles arrive in early 2013.
• GM sees "modestly improving" consideration for the Opel brand among German consumers.
• Higher prices and lower material costs are increasing profits. On the Astra, for example, that has meant an extra $500 in profit per vehicle this year.
Maintaining prices -- and ideally raising them -- is critical to Opel's turnaround, Joseph Spak, an analyst at RBC Capital Markets, wrote last week in a research note.
He wrote that nearly half the $1.5 billion turnaround must come from improved prices, volume and model mix. "This is no doubt a challenge, but price and mix is a big lever," he wrote. Spak figures that every 1 percent price increase in Europe adds more than $200 million annually to Opel's bottom line.
Another $800 million must come from reduced costs, both fixed and variable. Girsky said Opel is working on that: It has cut $300 million in fixed costs this year, including the elimination of about 2,600 salaried and hourly positions. GM Europe had about 39,000 employees at the end of 2011, down from about 50,000 in 2009.
Any additional plant closures in Europe would be "incremental" to achieving GM's breakeven forecast, Girsky said.
You can reach Mike Colias at mcolias@crain.com.
