GM Europe Breaks Even In Q1 2016, Looks Forward To Breaking Even For The Year5
For more than a decade, General Motors has been trying to turn around its European operations, which hasn’t posted a profit in well over a decade as a result of high costs and a contracting automotive market. But in the first quarter of 2016, GM Europe posted break-even financial results, marking a significant improvement over the $200 million it lost in the same quarter a year ago. Even more encouraging is that GM is planning on breaking even in the region for all of calendar year 2016.
“In Europe, we broke even in Q1 and we are on plan to break even for the calendar year,” GM Chairman and CEO Mary Barra says in a conference call outlining the automaker’s $2 billion first-quarter profit.
The improved financial performance is the result of a $5.2 billion plan that includes a new product offensive as well as cost-cutting measures launched in 2013. Even more promising is that GM’s European brands Opel and Vauxhall brands are growing faster than the industry.
“We are very pleased with the break-even result in Europe,” Says GM Chief Financial Officer Chuck Stevens. “The success of Opel’s recent launches has contributed to increased wholesales and related topline growth in the region.
“We’re also very focused on cost and we are utilizing tools such as operational excellence throughout the region, and you are seeing some of the results,” he says.
European car sales grew 5 percent in the first quarter, while deliveries by GM’s Adam Opel unit, which includes Vauxhall, jumped 8.4 percent to over 300,000 units, resulting in a market share growth of 0.2 percentage points to 6 percent compared to the same time period a year ago.
Barra says that the completely-redesigned, all-new Astra compact is a key part of the renaissance at Opel-Vauxhall. Based on GM’s D2 platform, the Astra was named Europe’s “Car of the Year 2016”, and over 150,000 orders have been placed for the vehicle. Next on the Opel-Vauxhall agenda is the launch of the Astra Sports Tourer (wagon) and the refreshed Mokka X subcompact crossover. GM also says that the Corsa subcompact car is gaining traction.
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Opel will always make money when rebadged as Buick so break even in Europe isn’t so bad.
How is that? How will Opel always make money when rebadged as Buick?
Most Opels are made in Europe, the currency fluctuates, and the retail operations are entirely different… so making money for GM in Europe is quite independent from anything related to Buick. The only exception is the R&D of new vehicles, which can be shared with Buick very extensively (if not completely). Other than that, Opel still has its own break even, its own cost structures, and its own deliverables that are entirely separate from those of Buick.
Alex, GM has been playing a shell game with Opel profits for a considerable amount of time with all licencing fees going to a Maryland bank account as opposed to GM Europe.
Opel contributes much to GM as a global company whether such contributions come in the form of Buick rebadges, platform development, or, over the decades, many rebadged Chevrolet products for Latin America. One could even argue that Opel was shut out of Russia, a region placed in the hands of international, during the boom years, only to be given to GME as the crash in oil prices began.
For a Europe-only marque, it is amazing how Opel products/intellectual property have had a global reach over the last generation, making GM a solid profit everywhere except Europe. These licencing payments would have helped Opel compensate for regional short falls during the economic crisis. Like VW, Opel could have used foreign profits to bolster domestic during lean years.
Much of this pertains to GM aiming for lower tax rates abroad and the company’s desire to take advantage of Germany’s generous corporate aid packages in which the government pays a portion of each employees income during economic downturn. “Loosing” money in Europe isn’t always a bad thing–ask FCA.
Opel would have been back in the black years ago had all licencing payments gone to Germany instead of s tee aying in China or going to the US. This is why Wall Street has been fairly quiet on European losses as opposed to demanding a sale or closure of European operations.
Steve, you dare to speak what we in Europe have known all along! … Well played that man!
Too many Americans regurgitate corporate press sound bites in an effort to sound Wall Street Journal informed while overlooking the GM-tattooed elephant in the room. The European taxpayers and workers have paid a steep price for the looting of Opel. This is why so many Germans were thrilled by the prospect of a Magna takeover an exactly why GM bucked the Auto Taskforce in order to keep Opel.
Had it not been for Opel handling Chevrolet “future cars” and platforms, GM would still be hobbled like Chrysler/FCA.