According to a report from Morgan Stanley, General Motors Europe and its (now-two) brands Opel and Vauxhall will finally turn a profit in 2015 thanks to cost-cutting and restructuring measures. Sales, however, are expected to remain sluggish throughout the rest of the decade. Coincidentally, GM-Opel predicts a break-even scenario. But breaking even or turning a slight profit isn’t necessarily cause for elation.
That’s because the investment firm estimates GM Europe to be worth about negative $11.5 billion, $4.5 billion more than its previous estimate of negative $16 billion. To note, Opel-Vauxhall lost $1.8 billion in 2012, or 10 percent of the almost $18 billion in losses the brands/operating units have racked up since 1999. Morgan Stanley believes that, by the time GM reports its full-year 2013 earnings, the unit will have lost about $837 million for all of last year.
GM Europe says it will break even by mid-decade, and Morgan Stanley analyst Adam Jonas believes the division is finally on target.
“We estimate GM Europe will generate $0.4 billion of combined profit over the next four years. We have improved our forecast for losses at GME further to $260 million in 2014 versus our estimate of $837 million in 2013, with a positive margin of one per cent for 2015 and 2016”, Jonas wrote in a report.
“We forecast Opel’s revenues to stagnate from roughly $20.1 billion in 2013 to $20.4 billion by 2017 on a backdrop of a shallow European recession. From this point we grow Opel revenue at between one and 1.5 per cent through 2021.”
GM Europe has taken several restructuring measures in recent months, one of which was to close its manufacturing plant in Bochum, Germany. In early 2013, Opel announced a $5.25 billion plan to develop 23 new vehicles and 13 engines by 2016.
According to Automotive Industry Data, Opel-Vauxhall sold 794,000 cars in Western-Europe in 2012, bringing its market share to 6.7 percent. This figure is expected to increase as the Opel Adam city car, recently-updated Insignia, and new Mokka continue to bolster sales.