General Motors’ European division, Opel, is having a tough time reaching profitability this year in light of Britain’s decision to leave the European Union and GM’s pull-out from the Russian market.
“The exit from Russia was really painful. Brexit is yet another issue to deal with and that is why the path toward breakeven is difficult for us,” the division’s CEO Karl-Thomas Neumann said at a conference in Berlin last Wednesday.
Opel, which includes British sister brand Vauxhall, has been working towards profitability. According to internal GM objectives, the subsidiary was targeted to break even in 2015 and begin to turn a profit in 2016 by optimizing costs, taking advantage of a recovering European auto market and introducing new products — widely considered to be the lifeblood of European carmakers. The division also absorbed the Russian market from GM’s International Operations division, adding sizable sales volume to its bottom line.
But in early 2015, GM pulled the Chevrolet and Opel brands from the Russian market as it slowed, removing notable scale and operational efficiencies. In doing so, the automaker also shut down its Russian factory.
Things started to look up when GM reported its first quarterly profit in Europe in Q2 2016, marking the division’s first profitable quarter in five years, but all hopes were shattered when the division posted a $100 million loss in Q3 2016 on decreased sales volume and revenue. In doing so, GM warned that it if current, post-Brexit market conditions are sustained through the remainder of 2016, its European operation could lose another $300 million in the fourth quarter.