Reilly Sends Opel On Mission Impossible

Bertel Schmitt
by Bertel Schmitt

Nick Reilly, head of Opel, or rather General Motors Europe, which supposedly doesn’t exist anymore, wants to be Superman.

In an interview with the Financial Times, Reilly said that Opel should shoot for an operating profit margin of 4-5 percent within four years, if not earlier.

In the world according to Reilly, Opel will perform like this: Opel will face “another tough” year in 2010, when Europe goes on C4C withdrawal. Reilly sees Opel to break even by 2011 and make a “decent” profit from 2012.

Says Reilly: “If we are successful we should be at least 4-5 percent. Four to five per cent gives a good return on investment and capital … It shouldn’t take more than four years.”

Industry insiders think Reilly is hallucinating.

In the car business, 4-5 percent margin on revenue is considered a miracle. Arndt Ellinghorst, head of automotive research at Credit Suisse, said: “In the best case, when the product cycle is peaking and car demand is booming, a mass market carmaker can reach a profit margin of 4-5 per cent.”

To make matters worse, Reilly said that Opel’s focus should be saturated Europe. Later, maybe, he sees Opel to expand to South America, the Middle East or other parts of Asia. Without immediate access to the growth markets, Opel is doomed.

Reilly plans to present a €3.3b ($4.7b) restructuring plan by mid-January. If those targets are part of the plan, then all that’s left for Opel is to pray.

Reilly Sends Opel On Mission Impossible
Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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5 of 6 comments
  • Bertel Schmitt Bertel Schmitt on Dec 18, 2009

    Hummer isn't sold yet. Tengzhong is waiting for government approval. The Chinese government is waiting for an application. Keystone Kops.

  • Steven02 Steven02 on Dec 18, 2009

    But the Hummer deal hasn't fallen through... yet. On the article, I don't think this is a bad idea. I also think that 4-5% margin should be attainable in just about any market. What you report is probably lower to avoid some taxes. But, I think the direction to succeed is a good thing. He wants something that is hard to achieve.

    • Bertel Schmitt Bertel Schmitt on Dec 18, 2009

      No, what I am reporting is the EBITDA margin. 4% - 5% on revenue is huge.

  • FromBrazil FromBrazil on Dec 18, 2009

    I for one am sorry that it is true that Opel have pulled out from emerging markets. GM's new product down here, the Chevy Agile (courtesy of Daewoo) not only looks horrible, but is also a truly "wondrous" piece of engineering. To wit, an air conditioning tube placed in the passeger seat footwell that was knocked out by about 4 in every 10 people to get into the car. Or the lack of heat protection for the exhaust that leads car journalists to warn people to not place anything sensitive to heat on the left side floor of the trunk. Or the huge front grille (oh my eyes!) that lacks any protection for the radiator in a country where the roads are littered w/ all kind of debris. Baby, baby! To be fair, it had a very surprisingly strong 1st month of sales. However, it seems to have cannibalized own GM's own line, as none of the direct competitors numbers were down. Oh well, as a new car it retails for a higher price than the cars it is cannibalizing so that's the silver lining. But it did knock out of the top 5 one of GM's own perennial best sellers (Corsa Classic). Top Ten in November 2009: 1 VW Gol 23k 2 Fiat Palio 16.7k 3 Fiat Uno Mille 12.7k 4 Chevy Celta 10.5k 5 Fiat Siena 10k 6 VW Fox 9.4k 7 Fiat Strada 7.9k 8 VW Voyage 6.1k 9 Chevy Agile 5.93k 10 Chevy Corsa Classic 5.88k

  • Greg Locock Greg Locock on Dec 21, 2009

    About 4 years back of the big auto companies the best two globally were around 6%, that was BMW and maybe Honda. The worst three (no guesses) were around -2%. Opel has the advantage, now that it is still owned by GM, that its return can be anything they want, since it depends on transfer pricing with GM_USA. If GM want Opel to make a profit, they'll pay a big licensing fee for some patent. if they want Opel to make a loss, they'll charge them a lot for back-office support. etc.