Oh, to be a fly on the wall of the GM boardroom:
“Did you see the latest Opel numbers?”
“What are these clowns thinking? We have an IPO to close.”
“Talk about timing. We should have sold them to the Russians. Who was the moron that cancelled that deal?”
“I hope the next rattlesnake wins.”
Indeed, the news from Rüsselsheim aren’t good, and with the IPO closing this coming week, they could not have come at a more inopportune time.
Opel is up to its eyeballs in losses. “In the third quarter, GM’s losses in Europe were three times as large as in the prior quarter,” reports Automobilwoche [sub]. Opel/Vauxhall’s operative losses amounted to $559m in the third quarter, after only $160m in the second. In the first nine months, Opel/Vauxhall lost $1.2b. Soon, you’ll be talking about real money.
Opel’s Reilly pointed fingers at restructuring costs (yep, it can get expensive to let people go in Europe, and we have an Antwerp plant to sell you), at currency losses due to a suddenly stronger British Pound (always iffy to produce outside of your currency zone), and at seasonal effects (Europeans unexpectedly took their summer vacations). But remembering the old adage that when you point a finger, three fingers point at yourself, Reilly came back to Jesus and said: “Even if you disregard these effects, we still have a loss. Our expenses are higher than our revenues.”
And that’s the crux, boys and girls. If your expenses exceed your revenues, then you have a problem.
There is no end in sight. 8000 jobs will have to be eliminated – that will cost serious money. To get rid of 2,600 workers in Antwerp, GM had to cough up $532m – a little bit over $200,000 per worker. In Bochum, 1800 jobs will be eliminated. Workers are holding out and refuse the offered six figure golden parachutes in wholesale fashion.
GM offers $140,000 to a 50 year old worker who has been with the company for 24 years, and makes $4,200 per month. The Bochum unions want “significantly more.” Don’t you wish you’d be a 50 year old Bochum Opel worker?
With 8,000 jobs to go and to be paid off, there will be monstrous losses in 2011. Who knows what will happen in 2012.
If it wouldn’t be for Opel, GM would be in hog heaven. Back home, GM makes money. In China, GM sells more cars than ever. Everything divvy in South America and the rest of the world. If Whitacre would have taken the deal the Germans and Russians had offered, GM would have reported an EBIT of $2.9b in the 3rd quarter instead of $2.3b – that’s a good chunk of dough. Buyers of stock are looking at future performance, and the cash drain of Opel will have a serious effect on the take from the IPO.