General Motors European arm Adam Opel AG may break even before its 2016 target date, according to a report from The Wall Street Journal. Opel had been losing money for nearly a decade before bringing in former Volkswagen AG executive Karl Thomas Neumann to lead the company through extensive restructuring measures, which involves introducing 23 new or revised models and 13 new engines by 2016.
The changes within the company are paying off now, it seems. Opel sales stopped plummeting last year, and during the first two months of this year, Opel and Vauxhall sales have increased by three percent. Neumann is sticking to his official target of breaking even by 2016, but didn’t disagree with analysts when they suggested the automaker could reach profitability by as early as next year.
“If everything goes well, theoretically that can’t be ruled out,” Neumann said an in interview with WSJ.
Neumann has a cautious outlook on the matter, as he is aware that Opel’s performance could be affected by factors which are out of his control. The European car market, while slowly gaining traction again, has struggled in recent years. Furthermore, sanctions against Russia and a possible war in the Ukraine could put a damper on Opel’s business in Russia. The brand sold 81,421 vehicles in Russia last year, around 8% of its total yearly sales of 1.06 million vehicles. Opel has canceled shifts at plants and worked shorter hours as car sales in Russia have fallen.
“We’re careful now with new investment and are trying to understand and monitor the situation as it develops,” Neumann said. “Of course, (development of the) Russian economy is a cause of concern.”
Helping Opel’s sales are popular new models such as the Adam city car, which is especially popular among young women, and the Mokka compact SUV, which has sold more than 200,000 units since first going on sale 18 months ago. Opel has also hired German ad agency Scholz & Friends to head its marketing campaign and acquired famous German model Claudia Schiffer as a brand ambassador in Europe.
Opel isn’t quite in the clear yet, though. The brand is still unprofitable and sales have only begun to rise. GM executives in Detroit, including CEO Mary Barra, will have a close watch on what is going on over in Russelsheim. Barra visited Opel headquarters in January, where she pledged her commitment to Opel and a further investment in the brand in the future.
“At the moment we are seen as a benchmark because of the holistic way with which we have approached the turnaround,” Neumann said. “Last year, for the first time in years, we not only met our targets, we surpassed them.”