Many questions, few answers concerning Opel's future. New management team is coming.
In an unusual Saturday conference call from Rüsselsheim, Germany, the newly appointed President of General Motors Europe, Nick Reilly, said the Opel CEO search has been abandoned.
Reilly is taking the job, vacant since early November when Karl-Peter Forster left, and adding it to his President of GM Europe role.
General Motors will now have three presidents; one for the U.S., the newly appointed Mark Reuss; one for Asia Pacific and Latin America, the newly appointed Tim Lee; and Reilly as president of GM Europe.
Reilly will be accountable for the results of both Opel/Vauxhall, while running it, and Chevrolet Europe, which will continue to be managed by Wayne Brannon.
More changes at GM are coming, said Reilly, who will announce a new Opel/Vauxhall management team next week. Reilly refused comment on any individuals. However, he continued to hint, without specifying where, that large cuts are coming.
The latest moves follow the resignation (or more likely firing) earlier in the week of Fritz Henderson as CEO, a post now assumed for an unknown length of time by U.S. Treasury Department appointee as Chairman of the Board, Ed Whitacre.
In another hastily called press conference last week, Whitacre refused questions and read only a statement about Henderson’s departure. Whitacre promised he would answer questions, soon, about GM’s latest moves, but has since cancelled a press conference scheduled for the upcoming week.
Clearly, loss-making GM is undergoing more wrenching changes, and its strategy is still emerging, if there is any clear strategy at all. What is certain is that the company is running out of time doing business in old ways — if it is to return to profitability and have a remote chance of repaying the $60 billion it owes taxpayers.
“To be sustainable, we must reduce capacity,” Reilly said about Opel, which continues to be a loss on GM’s balance sheet after GM spent billions to fix it during the last ecade. Speculation has it that half of the Opel/Vauxhall workforce will be sacked.
He did, however hint at Opel’s status after meeting with various governments and operations since his return from Asia in November to save Opel when the GM Board rejected a plan to sell Opel to Magna and Russion Sberbank.
In Reilly’s still emerging revised plan, Opel/Vauxhall needs €3.3 billion in total capital — $5 billion — of which €1 billion is for restructuring. The rest will be for investments in new products. Reilly expects to lose money in 2010, so government financing is needed, although no date was given for a decision.
Product gaps need to be filled. Opel needs a mini, Reilly’s top priority. (Although GM’s Asian expansion with SAIC just announced, and prepared under Reilly, would provide it with an export base for such vehicles — sure to be a combustible topic with European unions.) He also said the company would continue making light commercial vehicles. Initially, the Opel Ampera will be imported from the U.S. The Ellesmere Port plant is one of the candidates for eventual local production, but there are otherss and that is years off and volumes to this observer appear scant. Reilly also said Opel is looking at battery technology.
“There is a belief out there that GM has sufficient money in the U.S. that it can spend in Europe. That is not the case,” said Reilly, clearly lobbying against anti-Opel bailout sentiment among central E.U. government leaders and some German politicians, a country where Opel has half of its jobs and likely its highest costs.
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| Opel/Vauxhall Employees | 48,000 | 100% |
| Germany | 24,300 | 51% |
| Belgium | 2,600 | 5% |
| Great Britain | 4,700 | 10% |
| Austria | 1,700 | 4% |
| Poland | 3,400 | 7% |
| Spain | 6,900 | 14% |
| Hungary | 700 | 1% |
| Other countries | 3,700 | 8% |
“Much of that money will be needed for Delphi and completing restructuring in the U.S. We also have some of that money in an escrow account for disasters in the U.S. and we can’t touch that. Third, the US market remains depressed and we have to have some money to get us through 2011. We also need to pay back loans to the U.S. government. Finally, the money is US taxpayer money. We can use some of it outside of the US but not all,” Reilly said.
German support remains unknown for the latest structuring plan.
“We’ve prepared an application for the German government,” said Reilly. “They were willing to support Magna deal, so we expect some support for our plan…I am optimistic they will come forth with aid … but regardless, the German government decision will not lead to more or fewer lay-offs in Germany. The expectation is that we will get financial support from most European governments. We would be disappointed if Germany is the only country which does not participate.”
The composition of the new Opel/Vauxhall management team give Reilly an opportunity to blunt German criticism and co-opt a politician or two. We’ll see.