General Motors and Opel have long pledged 2016 would be the brand’s year. Opel has not recorded a yearly profit since 1999, and 2016 has been shaping up to be the first year in over a decade it would do so.
However, Britain’s exit from the European Union has thrown a cog in the profitability machine.
“We are facing strong headwinds at the moment, particularly in our largest market – the United Kingdom. The Brexit decision is not a good omen. Therefore the second half of this year is going to be anything but easy,” Opel Chief Executive Karl-Thomas Neumann said in a video posted on his Twitter account.
Yahoo reports GM and Opel are looking at $400 million in cuts across its European operations to offset predicted financial speed bumps to come.
“The result of the vote has adversely impacted the British pound, and the uncertainty has put a strain on the UK auto industry. If current post-referendum market conditions are sustained throughout the remainder of 2016, we believe it could have an impact of up to $400 million to the second half of 2016,” GM Chief Financial Officer Chuck Stevens said.
Although an official exit from the EU won’t occur overnight, automakers are already making contingency plans should things continue to head in unfavorable conditions. The Vauxhall Ellesmere Port assembly is the largest chip in Britain’s bet on sovreighnty.
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Excuses! Yes, the pound is down, but the UK was headed for recession anyway yet this has yet to impact Vauxhall sales.
Curious to see if Brexit effects any other automaker during the second half of this year.
GM would be wise to remember that Britain is it’s strongest market before closing any factories.
I think this is what you call pre negotiation posturing! The one thing that has not been mentioned about the UK leaving the EU is that once out the government would be able to offer financial incentives to keep factories in the UK which they cannot at the moment. Vauxhall, Nissan, Honda and Toyota please form an orderly queue outside No10 Downing Street on 1st January 2019!!!!! lol
“The Vauxhall Ellesmere Port assembly is the largest chip in Britain’s bet on sovereighnty.”
Pure BS, there are bigger issues than the Port but the inside track from GM is that Ellesmere will stay the actual risk is to the Vauxhall Vivaro plant at Luton.
Yup, Opel Group has certainly gotten itself into something of a bind. Rewind 15 years or so and the expectation was that Astra, Vectra and Corsa would be rolling off the tracks from Luton and the ‘Port. Fast-forward to the present day and following the demise of car production at Luton, the only UK built car model left is the Astra. Suddenly, shuttering Luton because then GME management were too frightened of the trade unions to close a German plant, looks like a seriously ill-considered decision.
At a time when Sterling has fallen against the Euro, imported Adams, Cascadas, Corsas, GTC’s, Mokkas, Merivas, Insignias and Zafiras have suddenly gotten a lot more expensive. To make matters worse, Opel Group has among the lowest rates of UK components of any manufacturer with a UK base… only MG’s is likely lower. So even the Brit built Astra won’t be making the money it once did for Opel.
If Opel Group is to be returned to profitability, then Vauxhall is key to that turnaround. The UK is Opel Group’s single largest market and GM’s fourth largest globally. In an industry where volume is central to efficiency and plant optimization, selling less in the UK isn’t an option. Nor is reducing UK production and importing more expensive cars from the EU.
In the post Brexit world, the short term priority should be to increase UK content in the Astra and the longer term aspirations must be to ‘build ‘em where GM sells ‘em’ and increase UK production output, to get a better component and production mix – to offset Opel’s significant exposure to the Euro – and of course, to increase the export footprint of GM’s British operations. Anything else will almost certainly result in greater pain for Opel.
Indeed, given the significant of the UK market to Opel – not just in terms of revenue, but in terms of product mix and margin – getting the UK wrong could decimate the business’ long term ambitions and potentially threaten its very existence. There are a lot of German jobs riding on how Opel Group responds.
They should’ve used Luton to build Europeanized versions of other GM vehicles.
If Opel licencing fees were returned to Europe the division would already be profitable. Vauxhall is EMEs only even somewhat healthy component. Aside from France, the UK is the only market in which VW does not dominate. It is vital that GM focus even more heavily on this market, and one way to do so it’s by not closing any more British plants.
While volume may be up for GME nonetheless margins are down while the brand still contends with an ageing line up.
It was silly to everpoint to 2016 as the profitability threshold.