GM signs off on plan to salvage Opel

A FIVE-YEAR business plan designed to restore General Motors’ hemorrhaging European operation, Opel-Vauxhall, to “sustainable profitability” has been approved by the Adam Opel AG supervisory board in Germany.

The company said the strategy would involve investment in new products, a revised brand strategy, cost cutting and market expansion, including more exports.

A key to cutting overheads would be the new alliance between GM and PSA Peugeot-Citroen, to share product development and manufacturing costs, it said.

Details of the plan were thin in the public announcement, and no official word was forthcoming on plant closures or workers redundancies at under-used factories.

Opel chairman Stephen Girsky said the plan would pave the way for Opel's strong future.

“GM stands behind Opel, and encourages both its management and employee representatives to continue working together to better satisfy customers and return quickly to profitability,” he said.

Opel vice-chairman and European employee representative Wolfgang Schäfer-Klug said the 2012-2016 business plan was a good basis for the future of Opel.

“The support by GM shows how important European engineering and the European Opel-Vauxhall sites are to the company,” he said.

“Opel must focus on its strengths in order to grow and secure jobs even in a difficult market environment.”

The plan puts to rest an immediate fears that GM might sever its European operation that has cost it $US14 billion over the past 12 years.

GM chief executive Dan Akerson has warned that the bleeding must be stemmed – a clear direction to the Opel board to take drastic action if necessary.

The American giant came perilously close to selling Opel in the global financial crisis, with car-parts giant Magna International teaming with Russian bank Sberbank going as far as shaking hands on a deal to acquire 55 per cent from GM.

The “new” GM that was created from the ashes of the company’s chapter 11 bankruptcy meltdown backed out of that deal and decided to try to save the European operation that is integral to GM’s small and medium car development.

Opel and its British Vauxhall arm pulled the annual loss back from $US1.95 billion in 2010 to $US747 million last year.

The Opel problems have been exacerbated by the downturn in the economy across Europe, where the German brand sells 99 per cent of its vehicles.

By contrast, major rival Volkswagen has a huge footprint in China and other growth markets such as Brazil, helping to insulate it against the Euro malaise.

Opel recently started export operations to China and Israel, and from September will begin selling Opel-branded cars in Australia where it ultimately hopes to sell 15,000 cars a year.

As well, Opel is expected to benefit from a major expansion of GM’s manufacturing operations in Russia, where the company plans to double sales by 2015.

While at least one German factory is expected to be closed, Vauxhall’s endangered Ellesmere Port factory have been saved by a GM decision to build the next Astra there, starting in 2015.

The Opel re-branding exercise is expected to take the company’s image slightly down-market, below Volkswagen.