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Costly restructuring may be required to save Opel/Vauxhall

By SYF77 on 07 Mar 2012

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General Motors recently reported that its European division, Opel/Vauxhall, had posted a jumbo loss of US$747 million (no pun intended) for 2011 before interest and taxes. Although the figure is an improvement over 2010’s loss of US$1.95 billion, the future does not look bright for the loss-making brand. “We have to match capacity with demand, and demand has been falling," said GM CEO Dan Akerson. Based on analysts’ prediction, Opel/Vauxhall is expected to record a loss of US$1.2 billion for 2012.

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Opel Chief, Karl-Friedrich Stracke, told reporters that an agreement with unions about a fix of money-losing Opel is a while away. “I expect this not to happen in a month or so, rather than in a couple of months, that’s at least how I see the timetable,” Stracke told Reuters. New York-based RBC Capital Markets analyst, Joseph Spak, estimates that restructuring Opel will cost US$600 million this year and another US$400 million in 2013. In a note to investors, he commented that ‘the cost is likely to be steep and the savings not immediate’.

Brian Johnson, an analyst at Barclays Capital, estimates that GM needs to cut 4,000 jobs in Europe and will cost GM anywhere between US$1 billion and US$1.2 billion. However, the unions have contracts that rule out plant closing or firings until 2014.

It looks like the various parties have to come together for a compromised solution before Opel goes down the road taken by Saab. That would be a pity as Opel does have some interesting models such as the Opel Astra OPC (below).

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Written by SYF77
I have been a car fanatic since 1989, when my father was changing our family car then to a Toyota Corolla 1.6 GL fitted with a Twin Cam 16 valve engine that was carburetor-fed, a big deal back in those days. The automobile technology and industry fascinates me and I hope to broadcast these interesting developments to everyone out there through this blog.

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