General Motors President Dan Ammann says that GM is performing to plan and that its European operations are on target to achieve profitability by “mid-decade”.
“The company is in good shape overall. And we are proceeding to plan,” Ammann said.
Go deeper with GlobalData
Dan Ammann was formerly Chief Financial Officer at GM before becoming GM’s “President” in January 2014. In his role as President at GM, Ammann has responsibility for managing the company’s regional operations around the world. He told just-auto that the company has been making the right investments and reorganising its operations across the world to create the foundations for sustainable profitability.
Speaking in London at a media dinner, Ammann said that GM is better integrating its operations on a global basis and is “on a similar journey that some other car companies have been on – or are currently undertaking – to move from a series of regional companies to a much more globally integrated business.” Ammann said that was illustrated in the product development area with a more global approach and organisation being applied. Product development within the company is now grouped in one unitary function, he said, with responsibilities allocated to engineering centres around the world within the company to produce shared and modular engineering architectures for global new product development.
In a review of operations around the world, Ammann said that GM has taken decisive action to clarify brand issues and adjust capacity to demand. “And we still have to build where we sell,” he said. “Currency fluctuations around the world mean that you have to do that.”
Turning to Europe, where GM is still making losses, Ammann said there are signs of stabilisation and market recovery with GM aiming to be profitable on its European business ‘mid-decade’. He said that precisely when GM Europe flips into profitability will depend on a number of factors such as total industry volume, but Ammann maintains that the European unit is on track to meet targets and has taken the right steps on cost and capacity, including the exit of the Chevrolet brand from the region. By 2022, Opel and Vauxhall are aiming for 8% market share in Europe as the number two OEM in Europe. The profit margin (earnings before interest and taxes – EBIT) is targeted to reach 5%.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“To do more than 5% you have to be in the luxury car business or in full-size pickups in the US or at the peak of the cycle somewhere. We have been at -5 or worse for a while. To get to zero would be a good first step. If you look around the world at mainstream non-premium car business and strip out cyclical effects it’s a mid-single digit business. We need to set an achievable target and develop a track record of progress towards getting there.
“Looked at from Detroit, we have made a big bet on Europe and it’s performing to plan. All the elements are in place for a successful business for us in Europe. We expect to hit profitability some time over the 2015/2016 period.”
Besides axing the Chevrolet brand in Europe and chopping assembly capacity by shuttering the Antwerp and Bochum plants, GM in Europe says that it is planning a total of 27 new models and 17 engines from 2014 through 2018. “We have made a number of tough decisions over the past few years to take capacity out, restructure the business and invest huge sums in new product. We took the decision to exit the Chevrolet brand from the mainstream market in Europe so that we can pool resources behind Opel/Vauxhall. The plan laid out two years ago is being successfully executed.”
In terms of ‘brand clarity’, the Opel brand is being positioned as an “emotional, approachable and German brand”. That means a focus on technical innovations, German engineering skills, and good value for money. “We have done a lot of work on brand positioning and there is more to do, but we are executing so that we have the right brand clarity for the market that supports what we are doing on product and getting to sustainable profitability.”
Elsewhere in the world, Ammann highlighted North America and China as especially positive for GM.
“The auto industry is recovering nicely in the US and our business is in good shape, notwithstanding the recall challenges that we have,” Amman said.
China continues to surprise on the upside according to Ammann. “We see the industry in China this year exceeding 24m units. We are on a big push with Cadillac; the luxury market is very strong. Buick is very well established. There is a big opportunity with Chevrolet too with a number of important model launches ahead.”
Amman told just-auto that its Chinese joint ventures are “very profitable” and that GM expects to sell over 3m cars in China this year. How does profitability in China compare with other regions around the world? “On an equivalent car basis it is higher,” Amman says. “So on an entry B level car profitability would be higher in China.” Any sign of the market softening? “Not volume-wise, but there has been some pretty relentless price pressure for a few years now. We take account of that in our business plans.”
In emerging markets Asia outside of China, Ammann said there were more challenging conditions in places like India and Thailand.
South America, too, has been troublesome lately. “In South America the environment there is more challenging than it has been for a while. There has been a slowdown and there is a lot of political uncertainty, Currencies have been fluctuating all over the place and industry volumes have been declining for the first time in several years. It’s a tough place to do business.”
On safety recalls, Ammann noted that there is a growing industry-wide problem caused by the increasing complexity, advanced technologies and systems integration within vehicles coupled with higher volumes and scale on shared architectures and component modules or sets. “With an environment of dramatically increased complexity and dramatically increasing volumes, there is the potential for more to go wrong and when they go wrong, they go wrong on a large-scale basis,” he said.
“The whole industry needs to adapt to these changing conditions.
“From an engineering point of view we need to have the right capabilities to spot problems – and it’s not just design release engineering (DREs) – it’s systems integration and understanding how systems work with each other. That’s a rapidly growing part of the required capabilities set. There aren’t any products of any kind with the complexity of a car that are built on such a massive scale. The traditional recall and regulatory environment is going to have to adapt, change and catch up with the way the products are changing, the way they are being engineered and sourced.”
From a company perspective, Ammann stressed that the most important thing in GM’s current recall issues is to ensure that the company does the right thing for its customers.
“This thing is there, it’s real, it won’t go away and we need to address it,” he said. “It’s not just about fixing what went wrong and making sure that it doesn’t happen again. There’s the backdrop of the increasingly complex car and the increasingly high volume architectures. All that is going to require different approaches.”
