Opel striving for comeback but GM unit faces uphill battle

19th August 2010, Comments 0 comments

Opel, the European unit of General Motors, is trying to claw its way back to profit with a major restructuring plan as the US giant gets set for a landmark recovery from bankruptcy with a share offering.

Already ailing before the global economic crisis, Opel sales tumbled 9.0 percent to 314,000 in the second quarter of 2010.

In the past 10 years, Opel's share of the European market has dropped from almost 10 percent to 6.6 percent, according to the European Automobile Manufacturers' Association (ACEA).

GM, baled out by the US government to save it from collapse, has returned to the black but Opel posted an operating loss of 160 million dollars (125 million euros) in the latest three-month period.

The European unit plans to cut 8,300 jobs out of 48,000 and will shut one plant, in Antwerp, Belgium while factories in Austria, Britain, Germany, Hungary, Poland and Spain have been spared for now.

GM meanwhile has promised trade unions it will invest 11 billion euros in new models and wants Opel to aim for the urban, mini-car segment of the market.

In exchange, workers have agreed to measures that should save the company 265 million euros per year.

Nick Reilly, the head of GM Europe, which includes Opel, said in July that he wanted to produce 1.2 million vehicles this year and 1.6-1.7 million in 2014.

He forecast an operating profit for Opel next year and a net profit by 2012.

But "Opel's future is anything but certain," German auto expert Ferdinand Dudenhoeffer told AFP.

He wondered whether GM will still invest in a loss-making Opel after the parent group wins back its US stock listing.

Opel has not benefitted like rivals from strong growth in China because it depends on the European market, which is slowing.

The company's image was not great before the crisis and has been weakened further by months of haggling, first over its prospective sale, and then between GM and the German government over state aid for the restructuring plan.

Opel has since unveiled a "lifetime guarantee" for its autos but while the plan has no time limit, there are several conditions, which Dudenhoeffer warned could turn off potential clients.

© 2010 AFP

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