Opel Eats GM's Profits Alive
When GM will announce 4th quarter and year-end earnings tomorrow, a lot of fingers will be pointed at Opel, and on GM CEO Dan Akerson who decided to keep the hemorrhaging unit instead of selling it off to Magna and the Russians. Bloomberg expects that tomorrow’s quarterly profit will be “GM’s lowest since it emerged from bankruptcy in 2009,” despite record sales in the U.S. and China. According to Bloomberg,
“The darkest cloud on GM’s horizon is Opel, the biggest contributor to GM’s $14.7 billion in European operating losses since 1999.”
Adam Jonas, an analyst at Morgan Stanley Jonas, estimates the value of GM’s European operations at a negative $8 billion. The automaker’s China business would be worth $10 billion, he said.
“The negative value of GM Europe is almost as big as the positive value of GM China,” Jonas said.
GM shareholders will demand action to cut German losses, but unions in Germany point to the contracts with GM that rule out further plant closures and layoffs.
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="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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GM management will lie, cheat, steal, rape and pillage. they strip innocent retirees, screw workers, leave communities to die but make sure they receive their fat bonuses. buy a Ford.
I don't mean to put a spin on things. The situation is drastic at Opel, however from the Bloomberg article it looks like Opel has cut losses by more than half since 2010. Losses for the first 9 months of 2011 are 582 million compared to 1192 Million for the first nine months of 2010. Full year losses for 2011 are estimated at 900 Million compared to 1.76 Billion in 2011. I would call this a commendable turnaround considering the EU economy is still in the toilet. There is still a lot of work to be done but it seems GM is on the right track. Global profits are expected to nearly double to 8 Billion in 2011 from 4.7 Billion in 2010. Once the EU economy improves and if by then GM restructures Opel's costs, we can expect Opel to be profitable consistently. Opel's small car engineering is very valuable to GM especially in very important emerging markets. Opel may already be profitable If GM attributes profits earned on Opel based products from other markets. For example the Astra based Buick Excelle is the number 1 selling car in China. The Opel Antara based Captiva is the number 1 selling car in South East Asia. The Cruze, built on Opel developed Delta II Platform is the number 1 car for GM globally. GM's global profits @ 8 Billion a year can easily absorb Opel's losses while using their engineering, similar to what Toyota has been doing. Toyota losses 4 or 5 times as much in Japan every year, They still have a major presence in Japan to utilize the engineering and technology expertise those workers provide. Opel's $1B loss in Europe is peanuts compared to Toyota's $5 B a year loss in Japan. I'm hoping GM doesn't put Opel for sale. It is too valuable from an engineering and market share standpoint.
cost base. Opel's cost base is in Belgium and Germany. VW has managed to move a lot of production to Slovakia, Hungary, Portugal and Russia where wages are far lower. The Touraeg/Q7, Audi TT, Eos, Scirocco, Sharan, Polo, and Tiguan are examples of this.
No Opel manufacturing exists in Belgium. The plant in Antwerp was closed in 2010. Major car plants are in Germany (3), Spain (1) and UK (1)