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GM official touts Opel’s 10-year comeback plan

 From The Burlington RecordMarch 13, 2013

The Burlington Record (Geneva) – After years of heavy financial losses at Opel, including a $1.8 billion loss in 2012, General Motors Co. is implementing a sweeping plan to cure its German subsidiary.

Putting previous failed rescue efforts behind them, GM vice chairman and chairman of the Opel supervisory board, Steve Girsky, and recently appointed Opel CEO Karl-Thomas Neumann have embarked on "Drive 2022," a 10-year plan to put Opel back in the black.

Rejecting continuing calls for GM to sell off Opel, Girsky said the Detroit automaker's board is firmly behind the new revival program. "The board is supportive of the plan, supportive of the losses, and supportive of funding new product," said Girsky, noting that GM has already "spent billions" on a new finance company, Allied International, largely to support the European market.

Opel is the third-largest car brand in Europe, and the second-largest within GM. "As such, there is no technical reasons for us to lose money," said Neumann, who joined Opel after serving as CEO of Volkswagen China. "We have structural cost issues which we are addressing in the UK and Germany and in Europe. And we need to look at material costs, which we are fixing. We also have the alliance with PSA Peugeot Citroen, which will allow synergies with purchasing.

"We are still selling one million cars. We should be able to make money on that."

How soon will Opel bounce back? Girsky said there is no sign yet that the "grim" European market has bottomed out. He predicted the recovery will be gradual, like it has been in the U.S. But the goal is to be profitable at current production levels by mid-decade.

At the Geneva Motor Show this week, Opel aimed to put a brave face on its problems with a display of new products and concepts, including the Cascada mid-size convertible and the Adam Rocks urban SUV concept car.

"There are smiles on the faces of Opel people here for the first time in years," said Girsky. "We want to get a lot of bad news out of the way and concentrate on getting product out there."

The "bad news" Girsky referenced included cleaning house at Opel's supervisory board over the past year. "Of the top 18 people at Opel a year ago, there are four left," said Girsky. "The relationship between Opel and GM in Detroit is better connected than it has been in years, with a lot of senior GM people on the supervisory board. We needed to change the culture and culture changes from the top."

On top of the management changes, Girsky said that Opel's relationship with the German automaker's powerful works council is "the best it's been in years."

A new agreement with the German union last week is a key factor, said Neumann, and comes on top of similar deal with British workers at Opel's sister brand Vauxhall.

Among the details of the Drive 2022 plan, noted Girsky, is a focus on examining variable profit, fixed costs and cash flow. "You start to unpack these problems," he said. "What drives variable profit? Material costs and revenue and you set up work streams around that."

A big factor in the push to cut costs will be the relationship with alliance partner PSA Peugeot Citroen.

After GM's previous unsuccessful alliance with Fiat, some industry analysts have questioned the wisdom of the partnership with PSA, which has severe financial problems of its own. But Girsky and Neumann maintained that the PSA deal is a smart move.

"PSA was a great opportunity for us in terms of logistics and purchasing savings and good platform sharing," noted Neumann. "Together we will be second-largest purchaser of auto components in Europe."

According to Girsky, "This relationship is more balanced than was Fiat. PSA will be doing as much for us as we do for them."

In terms of product, Neumann said that Opel now has its best portfolio in years.

It will be introduce 23 new cars in the next few years, plus 13 new engines. Opel is also entering new market segments with vehicles like the Mokka, Adam and Cascada.

The challenge now is to position the Opel portfolio properly and leverage the brand's 50-plus years of innovative and emotional cars.

"We have a new attitude, we want to attack again and we are proud of our brand," said Neumann. "As soon as people see there is light at the end of the tunnel I think there is so much sympathy for Opel that people will look at us again. Then they will see what great product we have."

Five or six years ago sales levels in Europe were strong, added Girsky. "Those people will eventually need to replace their cars. Our goal is to be prepared for that so when they do replace, they do so with our products."

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