Will GM Be Successful In Reaching Its 2015 Break-Even Target For Europe?
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Last year, General Motors announced plans to break even in Europe by 2015. But recent sales and fiscal data suggest that the goal may not be attainable in the less-than-two-years that remain to reach the target.
At the root of the problem is the glum automotive and economic landscapes in Europe, and it’s not entirely clear whether the automotive market in the region has bottomed out just yet as vehicle sales plunged 8.5 percent to 918,280 units in January 2013, the lowest in the last 23 years. Germany has become a particular cause for concern, as the country’s automotive market is now showing signs of a decline, even though it resisted the drop-off for most of 2012. The country, home to GM’s Opel operating unit, experienced an 8.6 percent decrease in car registrations in January 2013 on an annual basis.
There is, however, an upside to GM’s overall performance in the difficult European economic climate: The General’s sales fell at a slower rate (5.5 percent) when compared to the rest of the industry (8.5 percent). Helping slow the decline was the new Mokka subcompact crossover and Adam city car from Opel.
But even with GM’s sales declining slower than the rest of the industry, its 2012 fiscal data shows a $1.8 billion European loss in calendar year 2012 compared to $700 million in 2011 — denoting that the automaker is bleeding money at a faster rate. The fiscal bleeding seems to have slowed in the fourth quarter of 2012, however, as GM’s European division reported a $700 million loss in Q4 2012 versus $600 million in Q4 2011. Luckily, GM’s highly-profitable North American division made up for the European losses, but the losses in Europe nearly wiped out the $2.2 billion earned by GM’s International Operations for the full year in 2012. Of course, the financial results are chock full of special items and adjustments that impact the earnings figure.
Do these results show that GM is beginning to fall behind its plans for the mid-decade breaking even of its European arm? Perhaps. Nevertheless, the cause of the problematic performance doesn’t seem to be The General itself, Opel, Chevrolet, or Cadillac. Instead, it’s Europe’s economic climate that will continue to drag The General down to its 2015 break-even target. Coincidentally, GM’s cross-town rival Ford faces similar problems in Europe.
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Making a prognosis is always difficult, especially when it concerns the future.
BTW:
Wasn’t it Yogi Berra who coined this phrase?
BTW 2: Ford sales fell 25% in the EU27+EFTA region on a month-by-month basis from January 2012 to January 2013.
I think it will be really tough to break even in 2015. I think Alex is right though, it is not GM that fails, but the European economy.
As a native of the Netherlands, I must say though that where GM is failing, is positioning Chevy under Opel in the market. GM wants it like this: Caddy – Opel – Chevy. However, due to CO-2 bonuses and penalties,
e.g, the turbo engines by Opel get less penalty than the Chevy Cruze, which evens out their prize, in some cases the Chevy is even more expensive.
In comparison: for USA this would mean that a Buick Verano comes cheaper than a Chevy Cruze
Add to this that the huge engines in the heavy Cadillacs, as compared to the fuel efficient engines in Audi’s, BMW’s, Mercedeses, Lexuses and Volvo’s, and the Caddy’s are way to expensive in comparison to what they have to offer.
Personally I think GM will have to accept that Old Man Europe is very different from the rest of the world and what they should do is have Opel/Vauxhall call the directions for a three-brand-strategy, because honestly, I think most knowhow on how to be successful in Europe lies in Rüsselsheim.
@Centurion81 Well, the Chevy-Opel relationship is one thing to fix… but as far as Cadillac is concerned, the new line of vehicles (starting with the ATS) shouldn’t be affected by the problems you describe.
For instance, the ATS engine lineup in the U.S. (currently) features:
2.5L I4
2.0L I4 Turbo
3.6L V6
I’d expect the first two engines to pass all kinds of European efficiency and emissions tests (objectively and perceptionally among consumers).
In addition, the ATS will receive a diesel four-cylinder in the future — which I expect will become the engine of choice for European consumers. The high-performance V variant will follow, likely with a twin-turbo 3.6L V6 and battle with the M3, C AMG, and RS4.
At the end of the day, GM’s global product — especially Chevrolet, Opel/Vauxhall/Buick, and Cadillac — is finally getting to a point where it can be accepted and respected by any consumer on a global level. Now it’s just a matter of perfecting it, which I expect will happen with the next generations of each model. In the meantime, the Euro economic slump won’t help 🙁
If new & improved models continue to be launched when the current dip goes (some forecast 18 months) then surly the product will be at the forefront of people’s minds.
I’m convinced building & selling Kei cars in Europe would bring in sales if not much in big profit. They wouldn’t be sold as Chevy, Vauxhall or Opel but a ultra cheap budget brand (surly there are dozens of past European company’s ex names they could reintroduce) to sell the less desirable stuff whilst Chevy, Vauxhall & Opel sell the more normal & upmarket stuff.
It has to be the European market & not the product line up, desirable cars like VXR8, Maloo, (VXR Astra, Insignia & Corsa) Astra, Insignia, Cascada & Zafira tour Biturbo’s, New Adam to name a few with New Omega imminent.
Surly if any decision making for Europe is concerned it should be done at Luton, Vauxhall’s sales are nearly as much as Opel’s difference is Vauxhall is in one country & Opel’s is Europe wide & beyond. It is Vauxhall that is making all the right decisions.
How many domestic volume manufacturer does the UK have compared to Germany? In Germany, Opel has to compete with Volkswagen, Ford Germany, Audi, Mercedes, BMW and then added the import brands. In other big European markets such as France or Italy they also have volume automakers. Why should the decisions be done in Luton, if they are done in the U.S., where GM has the final say, and Germany? Have you ever dealt with the corporate structure of Opel and Vauxhall? GM UK ltd. is more like a distributor and even the factories are directly owned by Adam Opel AG. The good decisions for the UK are done in Ruesselsheim.
http://www.opel.com/experience_opel/company-information/facts-figures.html
Wrong again, the factories in the UK are owned by GM, and recently GM have also taken over those in Germany which were previously owned by Adam Opel AG as part of the financial restructuring of GM Europe
@kuku:
Other domestic volume manufacturer on Great Britain are:
– Ford
– Nissan (Sunderland)
– Toyota (Burnaston and Deeside)
– Honda (Swindon)
– Mini (BMW) (might be questionable if “volume”)
MG is still listed with the factory in Longbridge. Do they produce cars there?
Observer7 – just a few notes: Ford do not make cars in the UK any more, they have (until it closes shortly) a Transit van plant at Southampton and component production at Dagenham. BMW is classed as a volume producer but most go for export. MG is the wierd one! The cars are imported almost fully assembled from China and then a few bits of trim are added at Longbridge but volumes are tiny, their sales are even lower than Chevrolet and that’s saying something
@V8 Jon: Decisions are the same, Vauxhall’s success is more due to British chauvinism.
@ Alex: Ok, let’s take a factsheet then:
In The Netherlands:
Cadillac ATS starts @: € 51.530,- (source: cadillac.nl)
BMW 3 Series starts @: 32.898,- (source: bmw.nl)
Audi A4 starts @: 32.800,- (source: audi.nl)
Conclusion: Cadillac outprices itself or is outpriced by fiscal policies.
and then:
Opel Astra starts @ 19.495 (opel.nl)
Chevy Cruze starts @ 22.295 (chevrolet.nl)
Opel Corsa starts @ 12.995 (opel.nl)
Chevy Aveo starts @ 14295 (chevrolet.nl)
Conclusion: GM’s effort on brand positioning is totally wasted by fiscal policies. Opel is conceived as the better, more expensive brand with better rest value (and also has a lot better rest value), Chevy is perceived as the budget-brand (former Daewoo), yet the prices say the opposite thing.
This, in combination with fighting the old Daewoo-image is why Chevrolet is failing in Europe right now. That the cars are mainly built in Korea is not an argument – Toyota, Kia, Hyundai, Nissan etc. are successful too.
(please excuse my bad grammar at some points, I am no native speaker ;-))
When comparing start prices for Opels and their corresponding Chevrolets, I hope that you do compare the the same body styles.
In Germany, both the Astra 5-door hatchback and the Cruze hatchback start at 14,990 €. The Astra sedan starts at 18,270 €, the Cruze sedan at 19,790. Interesting, but i am not informed about vehicle details – motorisation etc.
BTW, when the Korean built Chevrolet are too expensive, maybe GM should decide to build them in Europe. The Opel factories, so I heard, have lots of free capacity.
Unlike the US where a central authority actually has power, the EEC has little leverage to control its member states and their finances. As a result local politics has damaged European ability to respond to the global economic meltdown.
Bottom line (since that is what matters here), Europe/EEC is several years behind the US economy. Therefore there will be no breaking even in 2015. 2018 is the likely most optimistic time.
Vauxhall’s success is more to do with excellent products, a performance range and the fact everyone likes them be it 17 year olds or 80+ year olds & everyone in-between. They sell various models catering for different tastes are seen as more upmarket than Opel and unlike Opel & other European manufactures keep vans separate from cars.
Don’t disagree Jon but I think also Vauxhall’s continued success at the same time Opel is on the slide (and more so Chevrolet of course) is also about brand management, sometimes GM are their own worst enemies. Given a free hand GM would love to be able to badge everything across Europe as a Chevrolet, it would suit their claim for Chevy being a global brand even though it is not and not ever likely to be – it is a brand that is very strong in the US Canada and South America. GM cannot understand why Europeans will not buy them in the same way. In the UK Chevrolet has been on sale for years now and is still being half sold by reluctant Vauxhall dealers, Dacia launched in the UK 2 months ago and I predict that this month they will overtake Chevrolet in sales – that’s how bad it is. GM were seriously looking at the end of last year about the feasibility of replacing the Opel brand with either Chevy / Vauxhall / Ranger or Buick in Europe none of which would have made much sense (apart from maybe Vauxhall in some markets) but with exception of Vauxhall in the UK their track record is not good. As for British chauvinism being the reason for Vauxhall’s success why do the English buy so many crummy Toyotas / Nissans / Hondas etc?
@V8 Jon:
“Vauxhall … unlike Opel & other European manufactures keep vans separate from cars.”
What does that mean? Seaprate in what sense?
V8 Jon you are doing as if Opel and Vauxhall were not the same.
The Japanese cars here tend to be purchased by more mature buyers
Japanese car sales are also not that strong here too, not helped by the Yen v Pound exchange rate cars such as Mitsubishi Evo & Subaru Impreza being withdrawn from UK sale.
@ V8 Jon: Vauxhall and Opel sell the same products and every Vauxhall VXR is the same as an Opel OPC version, so that can’t be the explanation to why Vauxhall’s relatively selling better than Opel.
VXR8 & Maloo are Vauxhall products exported from Oz, Opel don’t have these & nether had Monaro. There are certain van based MPVs Opel sell too that are not in Vauxhall’s range as well as Astra saloon. This is obviously due to the European market being slightly different to that of the UK’s.
Does GM really sell the Holden “ute” HSV Maloo in Britain as a Vauxhall?
These beasts here: http://en.wikipedia.org/wiki/HSV_Maloo
Selling the Holden VF Commodore as Vauxhall VXR on Great Britain and as Chevrolet in the USA — don’t you think that this can create some headaches as to brand imagery?
Vauxhall had Monaro I mean not Opel
Where in Europe (or world) is there a better range than this? Agila, Adam, Corsa, Mokka, Astra, Cascada, Insignia, Omega, VXR8, Maloo, Meriva, Zafira, Zafira Tour, Antara, Ampera.
Ok, I can see what the OZ-models can do for Vauxhall image-wise. Do you really think this is the full story behind the current difference?
It has to be taken into account as well that the british car market is a rare exception to the rest of Europe:
2012 UK: sales up 5% (best since 2008)
2012 Europe as a whole: down 8%
Not sure why it is, other than excellent products & a strong following of each be it V8’s, Astra’s, Insignia’s & Zafira Tourings. 17 year olds in Corsa’s or O.A.Ps in Agila’s everyone has a favourite. Cars that have been and gone such as Monaro, Calibra & Zafira VXR still have a following and a list of eager buyers should they return. Vauxhall is right on the pulse of the British buying public.
Opel fares differently in different countries. We have had access to the aggregate numbers published by ACEA for EU and EFTA countries, and there the GM group ranks fourth with 2012 market share of 8.2% after the VW, PSA, and Renault groups, with 24.8%, 11.9% and 8.5% respectively (Renault group in ACEA statistics is Renault plus Dacia, but not Nissan).
Seen as single brands, Opel/Vauxhall rank third with 6.8% 2012 market share after VW and Ford with 12.8% and 7.6% respectively.
These are European averages. According to an Opel press release about the order of 1250 Astras by the Hungarian police, Opel is market leader in that country. Unfortunately, I don’t how where and how to consult statistics of car sales in Hungary, and neither in the UKoGBaNI (the Vauxhall fans here might give me directions, please!).
As nothing is more successful than success, the success of market leader VW reinforces it by itself. People just trust that there can’t be nothing wrong with a VW and the resale values are good. So why look elsewhere?
As to British market statistics, I found them at http://www.smmt.co.uk
I had even found them some months ago, but forgotten about it.
I am not sure what V8 Jon problems are, but Opel and Vauxhall are seen as a single brand by GM written as Opel/Vauxhall. Buick and Opel are indeed still seen as separate brands, where Buick sales are not listed in the Opel statistics. Not sure, if GM will sell the Commodore as a Vauxhall in the UK again.
These things take time & although VW are good they ain’t perfection I’d take a Astra over a Focus or Golf a Insignia over a Passat or Mondeo & a VXR8 over a M5 or S6. Strong competition is good competition.
It maybe because the UK kept their Pound and din’t go that €uro fad.
Makers with excellent build quality, sporty ranges, V6 & V8 models and strong performing diesels tend to do well in the UK hence why top 5 manufactures are Ford, Vauxhall, VW, Audi, BMW.