Reilly said GM never wanted to sell the Opel Vauxhall business

Reilly said GM never wanted to sell the Opel Vauxhall business

A rare weekend back in the UK for Nick Reilly, the former managing director of Vauxhall, for the past eight years in charge of General Motors' Asian operations based in Shanghai and now head of the company's European business, Opel and Vauxhall.

So how was his weekend? "Bliss. I spent Saturday afternoon in a pub watching rugby."

Light relief for the man charged with turning around the fortunes of Opel and Vauxhall after GM decided not to sell the business to a Canadian-Russian consortium led by supplier Magna International.

Many thought that was a done deal but Reilly revealed that GM never wanted to sell the Opel Vauxhall business. But, when GM went into bankruptcy, the money from the 'bank of mom and dad' in the US dried up.

He said: "The only way forward was to find an investor to keep the business running but the deal with Magna was never finalised. There were still a number of issues to be resolved."

The deal was called off last September when GM announced it was keeping Opel Vauxhall. What changed?

"A new GM emerged out of bankruptcy with a new board of directors and the restriction on money from the US was lifted as long as the US taxpayers were happy about it.

"Pulling out of the deal did upset some people and we have had some relationships to rebuild particularly in Germany and Russia."

Loan guarantees

Before he can get down to the business of making cars, Reilly still has to persuade various European governments to provide loan guarantees so that he can raise the money fund the company's restructuring and future product development plans.

Opel Vauxhall is looking for close to EUR2bn (GBP1.8bn). The UK government has already said it will provide EUR300m (GBP270m) in guarantees and Reilly said he expects decisions from the German and Spanish governments, where the company has factories, within a few weeks.

He also expects to be able to repay the loans by around 2014. "Once we have completed our restructuring we expect to break even next year and to be making decent money in 2012."

That restructuring, aimed at reducing the number of vehicles it makes annually in Europe by around 20% to 1.6m, includes closing a factory in Belgium and cutting engine and vehicle production at the Bochum plant in Germany.

It is pain Reilly has had to go through before. During his time at Vauxhall he had to oversee the closure of the Luton car plant. Then he had to lead the negotiations when GM took over the operations of troubled South Korean carmaker, Daewoo.

Reilly admits he thrives on turning things around. "The auto industry has not been a piece of cake for some time.

"I was still in Asia when GM hit serious financial problems and headed into bankruptcy. Although we were making money in Asia, and particularly in China, we were told there was no more money coming from our parent in the US.

"This was a particular problem because we had embarked on some big projects in Thailand and India. The challenge was to find funding from elsewhere - and we did."

More efficient engines

Moving forward in his new role, Reilly identified the need to upgrade the engine ranges for Opel and Vauxhall cars. "We have slipped behind in terms of technology and our CO2 emissions are not always the best. We have some catching up to do and we have improvements to make across all of our powertrains.

"We will also significantly increase the money we spend on electrification. I think electric vehicles are going to take off much quicker than forecast."

Most predictions put the market for electric and hybrid vehicles at around 10% of all sales by 2012, Reilly believes it will be closer to 20%, for three reasons.

"European governments are ready to incentivise people to buy environmental vehicles and they are offering more and more support to car companies to make them. Second, consumers are becoming much more aware about EVs and third you have to take a look at what happening elsewhere, particularly in Asia.

"In China and Korea there is already huge investment going into battery technology and control systems. As congestion and environmental concerns increase, these countries will legislate to ban conventional vehicles or hugely incentivise EV sales, creating huge domestic markets."

Reilly's time in Asia also taught him that western companies and markets need to stay on their toes. "They may think they are still a long way ahead of the Asian carmakers but we can't underestimate how much money is being invested in places like China on technology."

Reilly has been with GM for 34 years, 15 of them in various posts at Vauxhall in the 1980s and 1990s, ending as chairman and managing director for the five years to 2001. He has also served in senior positions within GM Europe's Zurich office for three years.

Ampera for UK?

A decision on whether Vauxhall's Ellesmere Port plant will win the contract to assemble the Ampera plug-in hybrid model will not be made for another 12 months.

Reilly said the UK plant is a strong contender for the business and much will depend on what incentives the British government offers buyers of ‘greener' vehicles.

Government's offering the biggest incentives to boost their domestic markets will have a significant impact on GM's final decision over where to build the car which is due to be launched in Europe in 2012.

Reilly said: "The Ampera development is on track and by the middle of next year we plan to have a limited fleet on the road with major fleets and government departments."

Working against Ellesmere Port, he added, was not its productivity - among the best in Europe - but its competitiveness mainly because of the lack of UK-based suppliers.

"The UK supply base has been eroded over the past few years and that means Ellesmere Port has to buy most of its components from European companies in euros. With a weak pound that is not good news."

Will the supply base return? "It can, but it won't happen by accident. The British government will have to help out like other European governments who help companies with such things as soft loans, tax incentives and skills training."