GOLDING’S TAKE: Good poussin and nuggets of disclosure from a newly confident GM
Reilly is sticking to the projection that GM Europe will hit profitability in 2012
Rob Golding hears from GM Europe's CEO on how he sees the company's prospects.
Between mouthfuls at a fine restaurant somewhere in London, Nick Reilly, GM’s most senior motor industry man (think about it) and head of Europe had this to say last night about the day’s successful share placing and the outlook for the loss-making GM Europe:
On the US market
“The US market has turned quite fast. Sales and products have done quite a bit better than we thought. The average transaction prices have gone up substantially...by US$1,000 a car and that in a market that is still only 12 million compared with 16 million in its heyday. The retail market is particularly strong.”
“We are making very good money in China. We are number one there.
“In China we are going to be running with Chevrolet and Buick and two Chinese brands. We were trying to cover the whole market with Buick but decided about five years ago that was a stretch too far. There will be two different price points.”
On losing money in Europe
“We are still losing money in Europe. That is expected. Our strategy is about a year behind the moves we have made in America.
“We are taking out cost and capacity and building better brand strength.
“Eight thousand people will be gone this year. The cost of that will be €1bn both this year and next. We have had to delay cuts in Spain because demand and volume has gone up and we need the people.
“Financial benefit will be late because we will have to take some of the costs next year rather than being able to account for all the costs in this calendar year.”
On when Europe will be in profit
“Our plan is still profit for Europe in 2012. We are not that dependent on the market coming back. By 2012 80% of our product will be three years old or less.
“When we talked to European governments about profitability we said that we would still be in loss next year. Now we think that we could be in profit. Transaction prices in Europe are still not satisfactory.”
On the Opel brand
“The big challenge – especially in Germany – is brand which is not as strong as the product. The Opel reputation used to be cheap and reliable. Now that is not enough. It is no longer a positive. Opel must be priced well above Chevrolet.”
On UK plants
“Vauxhall in Luton [vans] and Ellesmere Port [Astra] are as good as the best GM plants in the world but are handicapped by the cost of so many components being imported. If the Government just sold the UK to companies coming into Europe we might do better. They have a big welcome from Eastern Europe but not from us.
"We need Vauxhall to be profitable. Last year was pretty bad all over Europe."
On the need for on-street recharging for plug-ins
"The game-changer for GM is the introduction of the Ampera/Volt electric car which will start as an import from the US from 2012 but is due to be assembled at Ellesmere Port from 2014.
“We are lobbying for on-street recharging in the UK. It is already happening elsewhere in Europe. Germany is behind but it will happen there too.
“We have to do it or the Chinese and Koreans will build all the cars and take the market away from us.”
On EV cost economics
"We will lose money on all the Amperas we sell initially. But the second generation car [the one that will be built at Ellesmere Port in 2014] will be half the price to build. It costs money to build a technical lead...but it is the right choice. In the UK we will be able to position Vauxhall as a low-emission brand.”
On fuel cells
“We are still investing in hydrogen fuel cells...we still believe in that.”
On future small cars
“There is a new entry car coming to replace Agila. Another entry car will come in 2013, and called the Junior, which will have the role of BMW’s Mini and be able to be fully customised."
On the 'Magna sale' fallout and what might have been
“Morale within the company has been very low. Some of our people got used to the idea that we were going to be part of Magna. That never happened and we no longer had a supportive and energetic team. Internally it was a fair challenge to get everyone facing in the same direction. Employees were very fragile. They needed to be lifted. At one time Bochum in north west Germany [second largest of four German plants] could have been closed. They had gone the wrong way with Magna. So could Ellesmere Port. That was on the block for closure instead of Antwerp.
“We had some of the other European VMs lobbying Governments to let us go [bankrupt]. Not everyone. Marchionne [Fiat] was also a serious runner for GME.”
On market share in Europe
“Our market share in Europe is 9%. It should be north of 12% in five years time. I can see 12% quite easily. I would hope to get to 12% in two years time.”