While General Motor’s UK-based subsidiary Vauxhall halved its pre tax losses for 2002, the American owner has still failed to return its European operations to profitability. With a declining car market, GM is not on target to reach its 2003 objectives and may need to cut costs once more.
Car giant Vauxhall, owned by General Motors, succeeded in halving its pre-tax losses last year to £51.4 million, against a pre tax loss of £100.9 million in 2001. GM has however insisted on the fact that the accounts did not give any real indication of how the company was performing because of the close ties between Vauxhall, Swedish subsidiary Saab and Adam Opel, the German business.
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Despite strong competition in the sector that continued to hit profitability, Vauxhall’s 2002 total sales were £2.56 million, compared to £2.46 million in 2001. The company’s Corsa and Astra models were among the top four selling cars in the UK in September 2003.
GM’s plan to return its European operation to profit by 2003 has not been achieved. The ‘Olympia’ plan was designed in 2001, following a similar move in the core US operation, and set out with a goal of cutting production by 15% and saving $1.8 billion by 2003.
GM Europe reported a loss of $3 million in the second quarter of this year, a significant improvement from a year ago when it recorded a loss of $115 million. Aggressive cost reductions and increased vehicle sales from Opel/Vauxhall and Saab improved its financial results. However, because of low sales and price pressure in Germany, its principal market, and other key European markets, GM is likely to miss its target of a $200 million loss in 2003.
GM realises that its European revival plan might not be sufficient to turn around its fortunes any more and will consider the necessity of additional measures. Further costs may need to be cut, even after the 2,500 job losses announced last year, and with the hole in Vauxhall’s pension fund more than doubling last year to reach £349 million, decisions will have to be made soon.
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