North American Int’l Auto ShowDETROIT – Market conditions should be more favorable this year than last, says General Motors Europe Chairman Carl-Peter Forster, but he stops short of predicting black ink for his operation in 2006.

In a wide-ranging discussion with reporters here at the North American International Auto Show, Forster says GME will continue to make moves to improve its productivity beyond its restructuring program announced in October, and he says it is likely the operation will offer hybrid-electric vehicles in the future. (See related story: GME Restructuring Moves Forward )

“There are some indications, we might see improvement in the German economy – and that would be big for us,” Forster says. “There’s a glimmer of hope. Of course we have this same glimmer every year, but this year the economic indicators are a little more positive.”

Forster says any improvement in Western Europe this year might not come from higher volumes, however. “Pricing pressure might not be quite as high as it’s been,” he says. “But we just don’t know yet.”

Antara CUV in concept form.

GME says it sold 1,982,300 cars and light commercial vehicles last year, up 1.1% from 2004 levels and good enough for a slight rise in market share to 9.5%.

On the cost side, Forster says GME is wrapping up the “tail end” of its restructuring program that calls for the elimination of 12,000 jobs. Those cuts will be completed this year and next through attrition and early retirement packages.

But Forster doesn’t rule out continued staff reductions if GME fails to increase production.

“Every year, you have to drive 3%-5% in labor productivity gains,” he says. “If you can’t (do that by growing) volume, you have to attrition people out. The question is whether you have to go beyond attrition – I hope not.”

Forster says attrition at GME is running at a range of 1%-3%, depending on the operation, but he adds that between now and 2010 the unit will see a bubble of sorts in the number of people eligible for retirement, potentially making that task easier.

As for black ink, Forster says, “Are we where we want to be in terms of profitability? Absolutely not. But it will be a year of more progress for GME. We’re getting there.”

Forster says he is looking forward to new product boosting fortunes at Adam Opel AG.

That includes the roadster it will share with Saturn, even though volumes will be small.

Opel will begin importing a version of the upcoming Saturn Sky 2-seat convertible next year from General Motors Corp.’s Wilmington, DE, plant. It will be sold in Europe only in left-hand-drive – there will be no Vauxhall version and the car won’t be offered in the U.K.

It’s difficult to “stretch the brand” with an image car like the upcoming roadster “when the core product lineup is not solid,” Forster says, referring to the recent past when Opel marketed its similar, but less-refined, Speedster model.

“Now I believe we have a core with the Astra and (upcoming new) Corsa,” he says. “Now the roadster will help the brand. We may sell only a couple thousand of them, (but) it honestly doesn’t matter. It’s a marketing tool.”

Forster says the roadster is a “good example of the future collaboration” expected between GME and Saturn in North America. That future could include more re-badged Saturn models from North America or vehicles developed jointly by both engineering teams.

“Or perhaps one day, we might export cars from Europe to North America,” Forster says. “It’s all open.

“Once we decided that Opel and Saturn will be sister brands, it opened up all sorts of opportunities.”

In addition to the roadster, Opel will launch a hardtop/convertible Astra and the Saturn Vue-based Antara cross/utility vehicle Forster hopes will counter sagging sales of the Vectra, which is suffering along with the rest of the midsize-car sector in Europe.

And big things are expected from the revamped Corsa, just now hitting the market.

“You tend to have a feeling about a product (before it’s launched), and the Corsa I’m confident about,” Forster says. “I think Corsa will do well toward the second half of the year.”

Also under study is a new large-car entry Opel could share with Saturn. “We haven’t made a final decision yet, but there are opportunities there,” Forster says.

The re-launching of DaewooAuto & Technology Co. vehicles in Europe under the Chevrolet brand “has worked beautifully,” he says, adding the marque will get a further boost from the debut of its first diesel model soon. Sales of the re-badged Daewoos grew 26% in 2005 to more than 240,000 units, giving the brand a 1.2% share of the market, GM says.

Although volumes will remain low, Forster is confident Cadillac sales “will grow nicely,” as well. Deliveries jumped 50% to more than 2,000 units last year, GM says.

"I strongly believe there’s a segment of customers (in Europe) that likes American culture,” Forster says. “We are addressing these types of buyers.

“We’re not talking hundreds of thousands (of sales),” he adds. “We will have to conquer the market step by step. You have to build up your reputation over time. And that’s what we intend to do.”

He says Cadillac’s cause will be helped by the availability of a diesel engine for the first time, when it rolls out its Saab 9-3-based BLS, now entering production. (See related story: GM Confirms Compact Caddy to Bow in Geneva )

Meanwhile, Forster says Opel will sell HEVs in Europe “sooner or later.”

“Europe will definitely get hybrids,” he says. “But my personal opinion is it will create less interest than it does in North America.”

dzoia@primediabusiness.com