Opel CEO Predicts Return to Profitability by Next Year

CEO Nick Reilly said Opel will work hard to rebuild its image and could possibly return to profitability as early as next year.

Speaking with members of the press at the Automotive News Europe Congress in Bilbao, Spain on Tuesday, Reilly said restructuring costs will prevent General Motors Company’s beleaguered European division from being profitable in 2010.

Last November GM withdrew its offer to sell its money-losing Opel division to Canadian parts supplier Magna International, Incorporated and its partner, Sberbank of Russia. GM’s decision to retain Opel came after months of negotiations with Magna and took many by surprise.

In announcing GM’s decision not to go forward with the sale then-CEO Fritz Henderson said, “We understand the complexity and length of the issue has been draining for all involved. However, from the outset, our goal has been to secure the best long-term solution for our customers, employees, suppliers and dealers, which is reflected in the decision reached today. This was deemed to be the most stable and least costly approach for securing Opel/Vauxhall’s long-term future.”

That “long-term solution” will now include the elimination of approximately 8,300 Opel jobs. Reilly said, “This year we have huge restructuring charges, and we haven’t taken the people out, but next year I think we’ve got a shot at getting to breakeven or even a little better … 2012 should be fine.”

Reilly is optimistic that the “hangover” effect being felt as scrapping incentive are phased out has not hurt the industry to the extent many had predicted. “The market is about a million units higher than we had predicted seven or eight months ago, and I for one don’t see a significant double dip in the auto industry,” he said. “Personally, I see a gradual, continual improvement.”

Last year, GM requested financial assistance in the form of loan guarantees from a number of European countries to aid in its restructuring of Opel. The request was withdrawn earlier this month as growing concern over the faltering European economy all but eliminated any chance that it would be granted. Reilly said he is confident that withdrawing the request will not harm GM’s relations with the governments of Spain and the U.K. which had already agreed to assist the automaker.

In addition to economic uncertainty among many European Union members, GM’s strong profit reports also undermined support for the request for assistance in rebuilding both the Opel brand and its U.K.-based sister company, Vauxhall.

Reilly said GM has no intention of abandoning its Vauxhall division. “We’ve been there a long time, we have a brand that’s trusted, we have no intention of getting rid of it,” he said.

He admitted that the task of rebuilding Opel’s reputation will be a difficult one in the brand’s home country of Germany. “We have lost some market share in Germany,” he said. “This could partly be explained by the end of the scrapping scheme in September which had benefited Opel, but I would say this is an excuse. Yes, we do need to recover the image in Germany.”

He also conceded that Opel’s reputation for quality and value has suffered in recent years. “We did — and this is kind of an admission — have a reputation some years ago for reliability,” he said. “I would admit that we have lost a bit of that reputation, but it’s still there in the back of people’s minds, and so we’re going to bring it forward again.”

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