DETROIT – GM Europe CEO Nick Reilly says it is unlikely Adam Opel GmbH will turn a profit in 2010, a situation sure to drain more money from cash-strappedCo., and predicts a tepid new-vehicle market in the region for several years.
Reilly also plans to reveal at the end of the week a new leadership team for the region, which essentially would fold GM Europe into Opel. The restructuring affects central leadership only, he says. Country heads will remain.
“It’s a different business, so we don’t need a GM Europe super structure,” Reilly tells journalists during a roundtable discussion earlier today at the North American International Auto Show here.
“What we announce on Friday or Monday will essentially be the Opel management team, and that will be the European management team.”
The management remake would accomplish a number of things. For starters, it aligns the management approach for Europe with that of North America, where the focus has been on breaking down GM’s historical bureaucracy and enhancing executive accountability.
It also serves a delicate political purpose, giving the German auto maker some of the autonomy it has reasserted after GM’s failed divestiture of the unit last year to parts makerInternational Inc. In addition, it makes sense from a sales and marketing perspective now that individual GM regions carry final responsibility for product execution.
Reilly designed a similar management restructuring while heading GM International Operations from Shanghai. He expects the move similarly will revive the “entrepreneurial spirit of GM’s European executives.”
But Reilly offers a dim near-term forecast for Opel’s profitability and Western European sales.
Opel has not publicly released its financial performance for last year, but Reilly unsurprisingly says, “We lost money.” He thinks Opel probably will lose money again in 2010, a development sure to pressure a cash-strapped GM.
Reilly says he continues to pursue government loans to partially support Opel’s turnaround. As of Dec. 7, Opel needed €1 billion ($1.2 billion) to execute its restructuring and E3.3 billion ($5 billion) to develop new products
A still-wobbly economy, on top of a hangover from government-sponsored scrappage programs that boosted sales in 2009, will combine to draw down Western European deliveries by 1 million to 1.5 million units to an estimated 13 million to 13.5 million units, he says.
“We’re going to get the payback for (government stimulus), so I think Western Europe is going to be significantly lower, with Central and Eastern Europe roughly the same – 2010 is not going to be a good year in any way.”
Reilly expects Western European sales to remain below 2008’s pre-global-recession level, or roughly 15.4 million vehicles, according to Ward’s data, for at least three years.
He also says the Opel will take some rebuilding this year. While the auto maker’s share in its home market has held, Reilly fears last year’s wave of negative news may have tarnished the brand. How much is an inexact science.
“You don’t find that out for a couple of years, because not everybody is in the market today,” he says. “People who may have been put off, we will maybe find that out when they come into the market the next time, which might be next year or the year after. So I’m cautious in saying we haven’t been affected at all, because I think we have.”
At the same time, Reilly says he draws optimism from a wave of coming product he thinks will wash away negative financial press.
He also says a detailed restructuring plan for Opel will be finalized by the end of the month.