General Motors spent decades operating Opel and Vauxhall in the red, but after one full year under French automaker PSA Group, Opel booked a healthy profit.
Automotive News (subscription required) reported Opel made a $978 million profit at current exchange rates in 2018. That’s compared to a $204 million loss under the last time Opel reported financials under GM ownership. Frankly, the turnaround is tremendous in such a short period of time.
The profits haven’t come without controversy, however. PSA CEO Carlos Tavares implemented tough cost-cutting measures after Opel and Vauxhall traded hands. Particularly, the French automaker cut 3,700 jobs from Opel’s German production sites and transferred thousands of other jobs from the Ruesselsheim research and development center to France’s Segula Technologies. Tavares also moved to halt costly discounting on Opel and Vauxhall cars to maintain pricing. He implemented a near-exact strategy for PSA Group as a whole when he took over the automaker.
Even though discounts vanished, Opel inventories dropped 32,000 units to 195,000 cars at dealerships by the end of 2018.
The Opel profits come two years ahead of schedule. Previously, PSA outlined a plan to return Opel to profitability in 2020 with a 2 percent operating margin. In 2018, Opel managed an astounding 4.7 percent operating margin and also booked $1.54 billion in positive cash flow to PSA.
The figures are an outstanding shift after decades in the red. The last time Opel booked a profit under GM was at the tail end of the 1990s.
Yet, it almost appears inevitable that Opel was bound to make a profit sooner rather than later. Under GM, Opel was nearly at the break-even point in 2016, but Brexit kiboshed those chances. Opel marketing under GM also worked to transform the brand’s image with years of innovative ad campaigns. However, with the major cost cuts PSA implemented, it seems unlikely GM would have realized the profit and operating margin Opel returned in 2018. The brand itself called the figure “historic.”
Comments
The title should read “… ending decades of losses under gm MISmanagement”.
Nearly 1B of profits under competent French management!!!!! Is this what happens when competent people run the show?
GM cant run a international subsidiary to save their pathetic skins. Ineptitude doesn’t even come close in describing their management style.
They are not doing much better running their domestic operations in the US..
Good to hear the news. I feel a relation to them from my 2015 Buick Regal, which has been a pretty solid car for me. Saw a lot of Opels when I was stationed in Germany.
Thought on PSA announcement:
1. PSA could have better management.
2. PSA may be better connected with EU governments.
3. PSA may know where the bodies are buried.
4. PSA is not a foreign owner even though GM owned Opel since before the big depression.
Cutting of all R and D and moving it to France, laying off thousands of workers, and not yet paying retirement pensions will do wonders for a company.
A lot of short-term consolidation gains from gutting the former company cannot last, I agree. Let’s see what happens next when PSA tries to break back into the US market – watch the red ink flow once again.
GM…. pathetic
Highly farcical for GM, if I would be a shareholder, I would’nt bet on these company. I’d like to say other thing!
I take it vauxhall workers will share in the profit share scheme?