Money pouring out at Opel
Today General Motors, the parent company of Opel, released it's results for the second quarter 2012. And the numbers reveal that the money is pouring out of Opel at a frightening speed.
In the second quarter the European losses amounted to $361 million which sums up to $617 million so far this year. As a comparioson, the losses in Europe in 2011 totaled $747 million. In other words, Opel is heading for blood red figures this year. How long will GM support this money losing dead wood?
No quick fix as Opel lose another $256 million in first quarter
GM has come up with yet another plan to make Opel profitable, but fail to predict when. The Detroit Free Press reports that analysts and industry experts do not give GM much hope.
GM on Thursday last week backed a plan to strengthen its loss strucken Opel unit, but according to analysts the road map lacks specific restructuring initiatives that are necessary to end 12 consecutive years of GM losses in Europe.
"It's hard to see a quick fix," UBS analyst Colin Langan said.
According to the plan Opel will close its factory in Bochum, Germany, after 2016, delay pay increases for German workers and invest in product development.
The plan would however not make any predictions when Opel could again be profitable.
For the first quarter of 2012 GM obviously had no fix as Opel lost $256 million.
GM CEO Dan Akerson expressed hope that Opel would see profitability within five years, but how many times have we not heard hopes like that?
"If you look out five years, I would be disappointed if we couldn't get to profitability (in Europe)," Akerson said.
Mr Anderson, please prepar to be disappointed.
GM on Thursday last week backed a plan to strengthen its loss strucken Opel unit, but according to analysts the road map lacks specific restructuring initiatives that are necessary to end 12 consecutive years of GM losses in Europe.
"It's hard to see a quick fix," UBS analyst Colin Langan said.
According to the plan Opel will close its factory in Bochum, Germany, after 2016, delay pay increases for German workers and invest in product development.
The plan would however not make any predictions when Opel could again be profitable.
For the first quarter of 2012 GM obviously had no fix as Opel lost $256 million.
GM CEO Dan Akerson expressed hope that Opel would see profitability within five years, but how many times have we not heard hopes like that?
"If you look out five years, I would be disappointed if we couldn't get to profitability (in Europe)," Akerson said.
Mr Anderson, please prepar to be disappointed.
Opel lost 19.9 percent two first months
For anyone who thought that 2011 was a bad year for Opel, 2012 is looking to be even worse!
According to Zeit Online, in January and February Opel has seen the sale decrease by 19.9 per cent compared to last year. That's when the Western European market in total is only down 7.8 per cent.
But that is not the only bad news. Opel's market share has also decreased. From 6.9 per cent to 6.0 per cent.
In other words, in a tough market Opel is doing worse than its competitors!
According to Zeit Online, in January and February Opel has seen the sale decrease by 19.9 per cent compared to last year. That's when the Western European market in total is only down 7.8 per cent.
But that is not the only bad news. Opel's market share has also decreased. From 6.9 per cent to 6.0 per cent.
In other words, in a tough market Opel is doing worse than its competitors!
Loss-making Opel under threat
From Reuters:
Frankfurt - The board of European carmaker Opel met on Wednesday under pressure from US parent General Motors to put an end to years of steep losses, with thousands of workers in Germany and Britain fearing the closure of their plants.
The 20-person board, which includes United Auto Workers boss Bob King for the very first time, was scheduled to begin meeting at Opel’s headquarters in Ruesselsheim at around 09:00 GMT.
The gathering was expected to last into the late afternoon. It was unclear whether management would submit a mid-term business plan, which would include plant closures, or focus on less sensitive issues such as the appointment of a new sales chief.
“All signs point towards escalation regardless,” said one source close to the board, who said plant closures would be the elephant in the room even if they weren’t discussed.
GM chief executive Dan Akerson and Opel chairperson Steve Girsky are pushing Opel CEO Karl-Friedrich Stracke to lower the company’s breakeven point by shifting production from high wage countries in western Europe to emerging markets.
Though Opel has said no plants will go before the end of 2014, most expect the 50-year-old factory at Bochum in western Germany will be earmarked for closure, along with one at Ellesmere Port, the company’s only remaining car plant in the UK, where the brand is known as Vauxhall.
“We’re not going to start trembling with fear just because everyone is saying Bochum will be closed,” said one source close to Bochum’s labour leaders, who was not authorised to speak to the press.
“GM won’t announce any plant closure today anyway, since they’d be crazy to give up their trump card. The moment they say which plants are safe, they can no longer play them off against each other in the hopes of extracting concessions.”
Economic weakness has hit car sales in Europe, forcing makers to confront high fixed costs and a capacity overhang in the sector that GM chief executive Dan Akerson says equates to up to 10 plants.
Opel’s own Antwerp plant, Fiat’s woefully uneconomical Sicilian plant, and the Trollhattan factory of insolvent carmaker Saab were shut down in recent years, while Mitsubishi is ending car production in its Netherlands facility by year-end.
But Europe still has around 240 plants in 27 countries and political resistance to plant closures has been strong.
In the United States, Detroit’s big three automakers - GM, Ford and Chrysler, now partnered with Fiat - closed 13 plants between 2008 and 2012.
Implications for Peugeot
The works council in Bochum, where the Opel plant employs about 3 100 workers building the Zafira MPV, said a closure would cost 45 000 jobs in total when related services companies and suppliers are added in.
“Opel Bochum’s employees are rightly asking themselves, ’What happens after 2014?’ Plant closures have not been taken off the negotiating table, just the opposite,” a statement from the plant’s works council said on Tuesday.
Detlef Holzhauer, a teacher from a school in Bochum who visited the plant with his class on Tuesday, said he had witnessed a steady erosion of jobs over a span of decades.
“We’ve been doing this since 1979, when Bochum still had 16 000 employees. It’s certainly been depressing to witness the whole demise,” he said.
Ellesemere Port employs about 2 100 plus 700 contractors.
Auto analysts expect a wave of plant closures across the continent at other beleaguered carmakers, such as PSA Peugeot Citroen, Renault and Fiat.
Action taken by Opel could be of particular significance for workers at Peugeot, which has agreed a cooperation deal with GM that is predicated upon each restructuring their European operations and sharing platforms to cut costs.
Analysts estimate that Peugeot has an even greater need to close down factories than Opel, in part because GM already reduced its fixed costs by 20% during 2010 and 2011 with the closure of the Antwerp plant and downsizing elsewhere.
Separately, the Opel board is expected to approve Alfred Rieck as new sales chief starting in July, replacing Alain Visser, who accepted a new position in Chevrolet’s global marketing department.
Until then Bill Parfitt, the former Vauxhall chief, is expected to serve as interim head of sales.
Frankfurt - The board of European carmaker Opel met on Wednesday under pressure from US parent General Motors to put an end to years of steep losses, with thousands of workers in Germany and Britain fearing the closure of their plants.
The 20-person board, which includes United Auto Workers boss Bob King for the very first time, was scheduled to begin meeting at Opel’s headquarters in Ruesselsheim at around 09:00 GMT.
The gathering was expected to last into the late afternoon. It was unclear whether management would submit a mid-term business plan, which would include plant closures, or focus on less sensitive issues such as the appointment of a new sales chief.
“All signs point towards escalation regardless,” said one source close to the board, who said plant closures would be the elephant in the room even if they weren’t discussed.
GM chief executive Dan Akerson and Opel chairperson Steve Girsky are pushing Opel CEO Karl-Friedrich Stracke to lower the company’s breakeven point by shifting production from high wage countries in western Europe to emerging markets.
Though Opel has said no plants will go before the end of 2014, most expect the 50-year-old factory at Bochum in western Germany will be earmarked for closure, along with one at Ellesmere Port, the company’s only remaining car plant in the UK, where the brand is known as Vauxhall.
“We’re not going to start trembling with fear just because everyone is saying Bochum will be closed,” said one source close to Bochum’s labour leaders, who was not authorised to speak to the press.
“GM won’t announce any plant closure today anyway, since they’d be crazy to give up their trump card. The moment they say which plants are safe, they can no longer play them off against each other in the hopes of extracting concessions.”
Economic weakness has hit car sales in Europe, forcing makers to confront high fixed costs and a capacity overhang in the sector that GM chief executive Dan Akerson says equates to up to 10 plants.
Opel’s own Antwerp plant, Fiat’s woefully uneconomical Sicilian plant, and the Trollhattan factory of insolvent carmaker Saab were shut down in recent years, while Mitsubishi is ending car production in its Netherlands facility by year-end.
But Europe still has around 240 plants in 27 countries and political resistance to plant closures has been strong.
In the United States, Detroit’s big three automakers - GM, Ford and Chrysler, now partnered with Fiat - closed 13 plants between 2008 and 2012.
Implications for Peugeot
The works council in Bochum, where the Opel plant employs about 3 100 workers building the Zafira MPV, said a closure would cost 45 000 jobs in total when related services companies and suppliers are added in.
“Opel Bochum’s employees are rightly asking themselves, ’What happens after 2014?’ Plant closures have not been taken off the negotiating table, just the opposite,” a statement from the plant’s works council said on Tuesday.
Detlef Holzhauer, a teacher from a school in Bochum who visited the plant with his class on Tuesday, said he had witnessed a steady erosion of jobs over a span of decades.
“We’ve been doing this since 1979, when Bochum still had 16 000 employees. It’s certainly been depressing to witness the whole demise,” he said.
Ellesemere Port employs about 2 100 plus 700 contractors.
Auto analysts expect a wave of plant closures across the continent at other beleaguered carmakers, such as PSA Peugeot Citroen, Renault and Fiat.
Action taken by Opel could be of particular significance for workers at Peugeot, which has agreed a cooperation deal with GM that is predicated upon each restructuring their European operations and sharing platforms to cut costs.
Analysts estimate that Peugeot has an even greater need to close down factories than Opel, in part because GM already reduced its fixed costs by 20% during 2010 and 2011 with the closure of the Antwerp plant and downsizing elsewhere.
Separately, the Opel board is expected to approve Alfred Rieck as new sales chief starting in July, replacing Alain Visser, who accepted a new position in Chevrolet’s global marketing department.
Until then Bill Parfitt, the former Vauxhall chief, is expected to serve as interim head of sales.
D-day approaching
General Motors is losing its patience with its money-losing subsidiary Opel: The U.S. carmaker is according to the Wall Street Journal planning to close two European plants. Particularly at risk are the plants at Bochum and Ellesmere Port.
It is apparently the start of a new drama about Opel: The management of General Motors subsidiary plans to close up to two plants in Europe, this according to the Wall Street Journal and Reuters news agency, who citing insiders. Next Wednesday the Board of Directors will deal with the latest business plan, which suggests the closing of two plants and cut production capacity by 30 percent, said the insiders. Most at risk are the plants in Bochum and Ellesmere Port in Britain.
General Motors (GM) have repeatedly stated that it faces excess capacity of 500,000 vehicles per year, two plants too much. "The new boss has visited the production plants one by one and played them against each other," said one board member from the workers unions. "We know the key points of the new business plan that could be presented on Wednesday. This suggests plant closures, and future growth will not be given for Opel."
The European operations of GM - that's Opel and Vauxhall to a lesser extent in the UK - in 2011 lost almost EUR 750 million. In recent months, rumors have arisen again and again that GM wants to sell Opel, or possibly close the Opel plant in Bochum. Recently the Frankfurter Allgemeine Zeitung reported that the cuts threaten employees in Germany. Also, the end for the Vauxhall factory in Ellesmere Port has been speculated.
By 2014, Opel, however, is protected by an agreement that excludes layoffs and plant closures. This was decided by management and unions in return for a strict savings plan two years ago, 8,000 employees were then removed and the plant in Antwerp Belgium was closed. Previously there had been a months-long tug of war over Opel, when for a long time the sale of GM's subsidiary was the plan.
"Sure, it's also about plants and production"
The factory in Bochum for Opel concerns about 5,000 jobs, the largest industrial employer in the region. At the plant the Astra and Zafira as well as axles and transmissions are produced. In 2007, there were 240,000 cars built there. In Ellesmere Port, different versions of the Astra are built. There Vauxhall reportedly has 2,100 people employed, and the plant has a production capacity of 187,000 cars.
In Germany, Opel has a total of approximately 40,000 employees and besides Bochum and Rüsselsheim still has plants in Eisenach and Kaiserslautern. A representative from the company said that no decision on plant closures in Europe has been made. The scope of the Opel management has become increasingly tighter. "The business in Europe is quite difficult for the entire industry, an improvement is not in sight. If things go this bad, you have to make decisions, it's not so much about what we or the unions want, it's about what the situation force us to do." One should not lose more time.
On Thursday, a spokesman for Opel in Rüsselsheim said that it is certain that we must improve. With the plants in Europe, we will talk about strategies to make Opel profitable. It is "clear that it is also about plants and production." At the factory in Hesse, the bands are currently paused on a daily basis, demand driven. Opel is also under pressure because of the recession in Southern Europe, hardly any new cars are sold.
It is apparently the start of a new drama about Opel: The management of General Motors subsidiary plans to close up to two plants in Europe, this according to the Wall Street Journal and Reuters news agency, who citing insiders. Next Wednesday the Board of Directors will deal with the latest business plan, which suggests the closing of two plants and cut production capacity by 30 percent, said the insiders. Most at risk are the plants in Bochum and Ellesmere Port in Britain.
General Motors (GM) have repeatedly stated that it faces excess capacity of 500,000 vehicles per year, two plants too much. "The new boss has visited the production plants one by one and played them against each other," said one board member from the workers unions. "We know the key points of the new business plan that could be presented on Wednesday. This suggests plant closures, and future growth will not be given for Opel."
The European operations of GM - that's Opel and Vauxhall to a lesser extent in the UK - in 2011 lost almost EUR 750 million. In recent months, rumors have arisen again and again that GM wants to sell Opel, or possibly close the Opel plant in Bochum. Recently the Frankfurter Allgemeine Zeitung reported that the cuts threaten employees in Germany. Also, the end for the Vauxhall factory in Ellesmere Port has been speculated.
By 2014, Opel, however, is protected by an agreement that excludes layoffs and plant closures. This was decided by management and unions in return for a strict savings plan two years ago, 8,000 employees were then removed and the plant in Antwerp Belgium was closed. Previously there had been a months-long tug of war over Opel, when for a long time the sale of GM's subsidiary was the plan.
"Sure, it's also about plants and production"
The factory in Bochum for Opel concerns about 5,000 jobs, the largest industrial employer in the region. At the plant the Astra and Zafira as well as axles and transmissions are produced. In 2007, there were 240,000 cars built there. In Ellesmere Port, different versions of the Astra are built. There Vauxhall reportedly has 2,100 people employed, and the plant has a production capacity of 187,000 cars.
In Germany, Opel has a total of approximately 40,000 employees and besides Bochum and Rüsselsheim still has plants in Eisenach and Kaiserslautern. A representative from the company said that no decision on plant closures in Europe has been made. The scope of the Opel management has become increasingly tighter. "The business in Europe is quite difficult for the entire industry, an improvement is not in sight. If things go this bad, you have to make decisions, it's not so much about what we or the unions want, it's about what the situation force us to do." One should not lose more time.
On Thursday, a spokesman for Opel in Rüsselsheim said that it is certain that we must improve. With the plants in Europe, we will talk about strategies to make Opel profitable. It is "clear that it is also about plants and production." At the factory in Hesse, the bands are currently paused on a daily basis, demand driven. Opel is also under pressure because of the recession in Southern Europe, hardly any new cars are sold.
Two wrongs don't make a right
Yesterday came the rumors that GM is in alliance talks with Peogeo over its European Opel operation. Both companies lose money in Europe, so has suddenly two wrongs started to make a right? Well, not according to Bloomberg:
General Motors Co. (GM) and PSA Peugeot Citroen (UG) have something in common: They both lose money in Europe. The issues they face may not be fixed by teaming up.
The two carmakers are in talks about forming an alliance to develop engines and build vehicles together in Europe, a person familiar with the situation said yesterday. A deal between the two automakers could link the 11 factories of GM’s Opel unit with PSA’s 12 European manufacturing plants.
Some analysts, including Max Warburton at Sanford C. Bernstein in London, are skeptical that the alliance will make much difference in the companies’ outlooks.
“Two wrongs don’t make a right,” he said. “PSA and Opel can’t restructure independently. We see no reason why putting PSA and Opel together would speed up the process of plant closures, as both have excess capacity.”
The companies have failed to end losses in Europe after extensive cost-cutting programs in recent years. The prospects for a turnaround aren’t improving with auto demand in the region poised to drop for the fifth straight year in 2012 as the sovereign debt crisis unsettles consumers.
Political interference and strong unions have hampered both companies from shutting factories and laying off workers to rein in costs. PSA is projected to use just 62 percent of its European capacity this year, compared with 74 percent at Opel, according to LMC Automotive in Oxford, England.
Carmakers risk losses when they use less than 90 percent of their capacity, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen.
Cutting Investment
“We routinely talk with others in the industry, but have no comment beyond that,” Klaus-Peter Martin, a GM spokesman, said yesterday. Peugeot spokesman Jonathan Goodman reiterated comments from Feb. 21 that the carmaker was in discussions on possible partnerships, without saying with whom.
Peugeot, Europe’s second-largest carmaker, last week announced plans to reduce investments and marketing spending as part of a goal of saving 1 billion euros, an increase from a previous 800 million euros. The steeper cuts come after the car- making division lost 92 million euros in 2011. The Paris-based manufacturer also aims to sell 1.5 billion euros in assets to reduce debt, which widened to 3.4 billion euros last year.
General Motors is planning more cost cuts for its unprofitable European unit after the last turnaround plan failed to end losses. The Detroit-based automaker’s Europe business, which is chiefly Opel and its U.K. sister brand Vauxhall, lost $747 million last year before interest and tax.
Shrinking Share
While that’s an improvement from $1.95 billion lost in 2010, GM had planned to break even in the region until November, when it pulled back the forecast as the European outlook worsened.
GM’s restructuring of its European operations may cost at least $1 billion, according to the average estimate of three analysts surveyed by Bloomberg last week.
The lack of distinctive models has eroded market share for the two groups. Peugeot’s share in Western Europe slumped to 12.6 percent in 2011 from 13.7 percent last year after its sales in the region fell 8.8 percent. Opel and Vauxhall’s share slipped to 7.3 percent from 7.4 percent. The GM brands controlled 12.6 percent of the market in 1993.
“From a U.K. perspective, Peugeot, Citroen and Vauxhall are probably the weakest major brands,” said Simon Empson, managing director of Broadspeed.com, a discount car website. “This is grasping at straws. What could you combine? They’re going after exactly the same customers.”
Potential Savings
Peugeot’s best-seller is the subcompact 207 line, which starts at 12,350 euros, and vies with Opel’s 11,825-euro Corsa. Opel’s 16,770-euro Astra compact, its top-seller, rivals Peugeot’s 17,050-euro 308 model.
Savings from a GM-Peugeot alliance may ultimately approach $2 billion to $3 billion for the Detroit automaker, according to an estimate by Morgan Stanley.
“Any restructuring of GM Europe would require cash resources from Detroit,” Adam Jonas, an analyst with Morgan Stanley, wrote as lead author in a note to investors. “We expect an alliance would help GM get more bang for its buck, and would not expect significant capital commitment over and above that required to initiate joint projects.”
GM could record savings by sharing vehicle platforms with Peugeot and tap into technology such as Peugeot’s diesel engines, Jonas wrote.
‘Who’s Going to Cut?’
The alliance possibilities cited by analysts are less far- reaching than the 1999 transaction in which Renault SA and Nissan Motor Co. bought stakes in each other. Robert Lutz, a former GM executive, said that year that Renault would be better off sinking $5.4 billion in the ocean rather than buying a stake in Nissan.
Lutz by 2005 had changed his mind, citing “the personality, drive, firm will and daring of Carlos Ghosn,” the CEO of both automakers.
The Renault-Nissan alliance is worldwide while a GM-Peugeot one would involve two money-losing European units.
“The problem of bringing together two generalists in the same region is who’s going to cut anything?” said Colin Couchman, a London-based analyst at IHS Automotive. “There’s massive crossover between the brands. They both have the same overcapacity problems and both have political interference.”
French Labor Minister Xavier Bertrand warned Peugeot Chief Executive Officer Philippe Varin against cutting jobs as a result of a deal with GM.
A deal would be good for Peugeot as long as it upholds “the long tradition of maintaining employment in France,” Bertrand said yesterday in an interview with the country’s Europe1 radio station. “It is evident that a group like PSA Peugeot, which has this tradition, has the responsibility of maintaining this tradition.”
French Elections
France’s government has taken an active role in protecting local jobs. President Nicolas Sarkozy, who’s running for re- election this year, summoned Varin on Nov. 17 to ask him to reconsider plans to cut as many as 6,800 jobs, including temporary staff employed by partners. The French carmaker last year distanced itself from a leaked proposal to close a French plant after the government described it as “unacceptable.”
German Chancellor Angela Merkel has also shielded German factories. She brokered the sale of Ruesselsheim, Germany-based Opel to protect jobs. The deal ultimately fell apart when GM backed out in November 2009 after exiting bankruptcy. A restructuring agreement stemming from then prohibits plant closures until 2014.
Backed by that agreement, Opel’s unions don’t feel threatened by a potential deal with Peugeot.
“It could be positive if we bring our respective strengths together,” said Rainer Einenkel, the head of the works council at Opel’s plant in Bochum, Germany. “I don’t see any competition with Peugeot because we build the more beautiful cars.”
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