General Motors’ European division, Opel, is slowly climbing its way to profitability. Under the leadership of CEO Dr. Karl-Thomas Neumann, the business unit expects to achieve break-even financial results in 2016 on its way to posting an EBIT margin in 2022. But according to Neumann, who this month is celebrating his fourth year at the helm of the Opel Group, the strategy is much more about slashing costs.
In speaking to Neumann in January, AutoNews asked whether the European volume (mainstream) car market is structurally a very low margin business, even during the good years. Neumann replied by stating that Opel’s plan involves cutting costs, but is much more driven by top-line growth:
“We have reduced costs a lot and we will do a little more, but that’s not how to get there. We can only get there with growth.”
Neumann, 54, stated that the automaker is investing heavily into new product to attain a market share of 8 percent by 2022:
“So we are investing into adding 29 new cars by 2020, and these cars must help us to get to an 8 percent market share in 2022.”
Neumann says that, at that point, Opel will “be in a much better situation”, since its “factories will be far better utilized” and all new vehicles will “sit on either GM or PSA global architectures with standardized modular components.”
Translation: economies of scale brings costs down, while increasing sales grows the top-line of the business, thereby reducing costs even further thanks to even reater scale economies.
“That scale will bring us to a cost situation where we can achieve the 5 percent EBIT margin in 2022”, concludes Neumann.