General Motors reported very healthy earnings for the 2016 calendar year, consisting of a net income of $9.4 billion (down 2.7 percent), earnings per share (EPS) diluted of $6.00 (up 1.5 percent), and earnings before interest and tax adjusted (EBIT-adjusted) of $12.5 billion ($15.9%) on net revenue of $166.4 billion (up 9.2 percent). During that time frame, the automaker’s European division, otherwise known as GME or Opel-Vauxhall, posted a $257 million loss, the division’s sixteenth year of not posting a profit.
Though GM Europe’s results represent a notable improvement over the $813 million loss in 2015, it apparently wasn’t enough, as GM elected to sell the Opel-Vauxhall unit that comprise GM Europe to French automaker PSA Group.
| Metric | 2016 CY | 2015 CY |
|---|---|---|
| Net Revenue | $18.7 billion | $18.7 billion |
| Net Income | -$257 million | -$813 million |
| Sales Volume | 1,162,000 units | 1,127,000 units |
| MarketShare | 6.0% | 6.1% |
The Details
GM Europe’s net income of negative of $257 million was an improvement of $556 million from a negative $813 million in 2015, demonstrating that Europe has made substantial progress towards its plan to break-even by taking advantage of a recovering industry, cost optimization and the benefits of the Astra launch, resulting in Y-O-Y improvement in results. However, despite the improvements experienced through most of 2016, the unit was unable to overcome the impacts of the U.K. referendum vote to leave the European Union (Brexit), resulting in a $0.3 billion unfavorable impact due primarily to adverse movement in the British Pound against the U.S. Dollar.
GM anticipates that the impacts of Brexit will continue through 2017 as well as headwinds associated with industry pricing pressures and increased costs associated with depreciation, amortization, marketing and costs associated with GM Europe’s new product launches. The automaker intends to mitigate these headwinds with the full-year benefit of the recently-launched Astra and Mokka X along with the 2017 launches of the Insignia, Ampera E, and two new crossovers — the Crossland X and Grandland X — that GM believes will substantially increase its competitiveness in the market.
GME had the following KPIs during the year:
- Volume: total volume was flat while products such as the Opel Astra continue to be very well-received in their local markets.
- Mix: unfavorable primarily due to country and channel mix as a result of Brexit.
- Cost: favorable year-over-year due to carryover material performance and fixed cost.
improvement, partially offset by incremental material cost on majors. - Other: unfavorable due to weakening of the British Pound.
Given the sale of Opel-Vauxhall to PSA, we expect this to be the last earnings report for GM Europe, at least the GM Europe that encompasses Opel-Vauxhall. Perhaps GM will return to Europe with its Chevrolet brand.
Related News & Info
- GM 2016 earnings
- Continuous GM earnings coverage
- Continuous Opel-PSA Group coverage
Comments
Return to Europe with the Chevrolet brand?
The author must have heard Mary Barra explaining the withdrawal from Europe with the supposedly widening rift between European regulations and those in other parts of the world. The Opel operation with about 1 million cars sold could therefore not be successful.
So, why should a small scale import of Chevrolet Cruzes and Aveos be better?
I initially thought that GM and PSA would create an alliance like the Renault-Nisssan alliance. But nope. I see this as a capitulation in front of difficulties.
The basic problem — besides the decline of US world power (embodied in the central word in Trump’s propaganda: “again”: “make America (he means the USA) great AGAIN”, thus acknowledging that the USA is no longer the one and only dominant power on this planet).
The basic problem of GM is that they have never managed to transform the heritance from GM’s founding — cobbling together various automakers, without really making one company out of them — into a sensible global multi-brand company.
Latest after the bankruptcy in 2009, they should have streamlined internationally on three main brands, and keep in North American not Buick, but Pontiac.
Forging one global line of mainstream cars, which would have gone in various regions by different names, but with the same cars, the same way as Vauxhall cars are the same as Opel cars, just with a different brand badge on them and the aura of being “very British”. Let it be called Buick in China, Holden in Australia and New Zealand, Opel in Europe (and, sure, Vauxhall on Europe’s biggest island), Chevrolet in America (North AND south), and with overlaps, but without trying to make them look as different cars. Differnces due to different regulations notwithstanding.
Keep Cadillac as the obvious premium brand, Pontiac as the brand with the extravagant styling, Daewoo as the global cheapo brand (the way Renault uses Dacia) and possibly GMC for commercial vehicles.
Well, that is too late.
We’ll see what the future brings.
Agreed on GM building one global value-oriented “hyperbrand” (Chevrolet, Opel, Vauxhall, Holden). I’ve been saying this very thing for years. Powertrains could have been built in partnership with PSA.
As for Buick we disagree: The Chinese see it as an Acura-like brand and Buick is seeking enough units in the US to ensure profitability. Pontiac was simply too damaged and Chevrolet already covers the muscle segment with Camaro, SS, Corvette and probably a new mid engine Corvette coming soon.
GM has the space for two different, unique luxury brands provided that they offer differing images and line ups. We see this being possible with VW or on the mainstream level Hyundai-Kia.
Opel only loses money on paper because it fails to receive appropriate licencing fees. In addition, much of today’s GM rides on platforms born in Germany. Opel is a big reason why both Buick and Chevrolet rank high on quality indexes. I doubt that this will continue with Chinese or Detroit R&D even if GME engineers migrate after completion of sale.
That would be, “perhaps” bring Chevrolet to Europe. Key word being “perhaps”.
Long term, they will need to do it… one way or another… for the purposes of competitiveness and scale. Something tells me that this will coincide with Chevrolet’s return to Russia, as well.
To answer your question about why Chevrolet could fare better than Opel: it wouldn’t fare better from a brand or image standpoints… but it would help so much not having the costly manufacturing structure with many low-productivity plants that Opel had.
Bottom line is this: if offering Chevrolet in Europe would deliver even one measly million USD in profit from the European market, it would already be better than the unit’s operating performance of the past 16 years.
By selling Opel to PSA, GM said bye-bye to Europe. Simply capitulating before the problems. Giving up.
A return with mainstream brands like Chevrolet would be difficult after having burned the existing Daewoo dealer network. GM would have to start from scratch and find new, completely naive dealers which have no memory of the zig-zags which GM has inflicted on the Daewoo dealers. Or sell per Internet shop. Anyway, the West European market is completely saturated, there is mostly replacement demand, not new demand. It would be a up hill undertaking.
I suspect also a political motive. I noticed a gleam in Ms. Barra’s face when sitting next to this humbug Trump who promises a more confrontational course against the minor powers in Europe and elsewhere.
Observer7 is right. There is no place in Western and Central Europe for any of GM’s core brands (Chevy, GMC, Buick and Cadillac).
Chevy cannot compete with any other mainstream brand in Europe. There are world between a Chevy and a Kia/Hyundai for example. Chevy may work in US and Asia but not in Euope, same for Cadillac.
In Russia I see opportunities for GM and PSA-Opel both even after the retreat in 2015.
Sorry, but I did not say that ther is “no place in Western and Central Europe for any of GM’s core brands (Chevy, GMC, Buick and Cadillac).”
I said only that GM has never ben able to establish and follow a consistent gobal multi-brand strategy.
And that the circus with Daewoo becoming Chevrolet and then trying to sell the same class of cars in the same segment both as Chevrolet and as Opel and then cutting off the Chevrolet sales, and then giving up on the European market as being too difficult leaves any observer atonished with mouth open wondering what kind of fools is behind that.
“Anyway, the West European market is completely saturated, there is mostly replacement demand, not new demand.”
Well…
Even the current mainstream brands are in trouble in Europe because of the high competition. Europe is saturated as you said. Most of the cars of these old brands are developed in and for Europe (and for the most part buit in Europe) and they are present in Europe for decades after investing billions.
So how could Chevy Cadillac or Buick gain a foothold in such a market without building and developing cars here?
And you are right customers will never trust GM again.
“And you are right customers will never trust GM again.” — I did not say that.
Mazda also has no assembly plant in Europe
Here’s what I think is happening, customers/media go over GM products with a fine tooth comb trying to find anything and everything to give negative marks about GM cars and trucks. While at the same time giving a pass to other automakers by not being as picky as they are to GM.
I have worked on just about every car make made, they all have their fair share of problems. Some manufacturers don’t get the riot act to the extend as GM does.
Why is this? People act like benz, bmw, audi, never break down.
It’s like people who never anything negative about their kids, as if they are perfect!
You talked about zickzack and circus. That is what customers remember and the dealers (you mentioned) too.
Yes Mazda is an exception. This why i wrote “most of” them.
There are two specific problems or better reasons why GM will never get a foot in the door in Europe. First, GM has no strategy in Europe (remember all the stuff with Opel/Vauxhall, Saab, Daewoo, Chevrolet, Cadillac). Second, GM’s core brands are not designed or engineered with Europe in mind (and not built in Europe).
Another reason is that as you said Europe is satured. It is very difficult to enter this market, especially if you don’t have a competitive Portfolio and if you don’t understand the market.
The general public is more likely to forget that zig-zag policy, but the business people of the car dealer companies would be not tempted to engage with GM. Wouldn’t GM desert again after some short years?
As to the cars — I think that the Chevrolet Cruze and Malibu did fit very well in the European market place. I liked the Malibu more than its Opel counterpart, and — after GM had decided to create a Cruze hatchback and had the good idea to let the Australien GM design bureau create it, the Cruze hatchback looked — in my eyes — better than the Astra. The Aveo/Sonic was too narrow compared with the Corsa (which still stands on the succesful small car architecture developed together with FIAT).
But these cars were introduced in a foolish way.
$ 257 million is not a big loss compared to previous years, looks like GM sold Opel when it becomes profitable.
The Astra is selling well and three new models will arrive this year, GM has paid the development costs of these new vehicles and PSA will reap the benefits.
Tavares made a great deal, merci Madame Barra.
Waffen SS?
What is that supposed to mean in this context?
The same troll who spread his provocations as “blitzkriegSS” on the German languge “Motor Talk” forum?
And people still wonder why GM sold off opel and Vauxhall
GM can rebirth Daewoo not like Dacia but with the same synergy as VW Groupe with VW AUDI SKoda and Seat without forgetting Bentley and Bugatti. for GM it could be Cadillac as luxury, Buick for premium, Chevrolet as core brand against VW and Daewoo against Seat, Dacia and others entry market brands.
There’s only one reason GM won’t be able to sell cars in Europe, and that is the people will refuse to purchase the car because of what company is making it!
GM can build cars that are as good or if not better than anything in Europe, what I don’t like hearing from the people of Europe is that no matter how good your product’s are we are not going to buy them.
Those people take this aditude within their own boarders but expect people in the US to purchase cars from Europe based on how good they are!
I hope GM does return to Europe and brings over cars that are better than the competition. Which will force the people of Europe to except the notion that buying from GM is preferred!
I refuse to let the people of Europe off the hook for not supporting GM , I am glad the sell happened.