Opel's 2020 vision: Profit, finally

Loss-plagued German carmaker Opel on Thursday unveiled a plan to return to profit in 2020 thanks to savings its new owner French auto giant PSA is to help it achieve without plant closures or forced job cuts.

PSA, which also owns Peugeot (Other OTC: PUGOF - news) and Citroen, took over Opel and its British sister brand Vauxhall from US giant General Motors (NYSE: GM - news) in August for 1.3 billion euros ($1.5 billion) with the hope it could turn around the lightning logo carmaker which has not recorded a profit since 1999.

"We have a real opportunity to rescue this company," PSA chief executive Carlos Tavares told a press conference at Opel's historic Ruesselsheim headquarters near Frankfurt.

Opel-Vauxhall CEO Michael Lohscheller, who was given 100 days by the new owners to draw a map to drive the firm out of the red, laid out measures to boost competitiveness and cut costs by "700 euros per car" in three years.

"This plan is paramount for the company, to protect our employees against headwinds and turn Opel-Vauxhall into a sustainable, profitable, electrified, and global company," Lohscheller said as he presented the plan.

Called PACE!, the plan appears to rely heavily on savings from adopting PSA technology and merging some functions to achieve economies of scale.

- Fewer platforms, more savings -

Synergies with PSA are expected to result in savings of 1.1 billion euros by 2020 and 1.7 billion by 2026.

Two PSA car platforms, destined as the basis for several models, will be quickly introduced at Opel-Vauxhall manufacturing sites, speeding the shift to PSA engines and transmissions.

Overall, Opel aims to reduce the number of platforms it uses for passenger cars from nine currently to two by 2024, with the number of powertrains cut by ten to four.

Adopting PSA equipment should also help Opel comply with new EU-wide carbon emissions regulations, an area where it has been seen as lagging.

"Having full access to Groupe PSA technologies, Opel/Vauxhall will become a European CO2 leader," the company said in a statement.

The plan also calls for a quick push to market with electric cars.

- The future is electric -

Opel's famed Ruesselsheim site will become an engineering hub with a focus on electric vehicles and automated driving technology for the entire PSA Group, as European automakers scramble to catch up with tech giant Tesla in the race to produce the cleaner cars of the future.

"By 2024, all European passenger carlines will be electrified ?- offering a pure battery electric propulsion or plug-in hybrid version alongside efficient internal combustion engines," Opel said in its statement.

It promised four car models would have electric options by 2020, including a fully electric SUV and its sub-compact Corsa.

The carmaker is hoping that the measures will help it reduce its profitability point to 800,000 vehicles. Opel-Vauxhall sold around 1.16 million vehicles last year.

- Nobody to get the sack -

The plan also had some good news for the employees of the storied German carmaker who had been bracing for job cuts.

"The plan is designed with the clear intention to maintain all plants and refrain from forced redundancies in Europe," said Opel.

"The necessary and sustainable reduction of labour costs shall be reached with thoughtful measures such as innovative working time concepts, voluntary programmes or early retirement schemes," it added.

Opel-Vauxhall employs some 38,000 people around Europe, around half of them in Germany.

Industry expert Ferdinand Dudenhoeffer, director of Germany's CAR (HKSE: 0699-OL.HK - news) research centre, said the plan was headed "in the right direction" but left many questions unanswered.

Dudenhoeffer, who has estimated that Opel-Vauxhall will need to shed some 6,000 jobs as part of the restructuring, criticised company bosses for not spelling out how many voluntary redundancies they were seeking.

- 'Fiji or China?' -

He also said the company was too vague in its announcement that it plans to enter more than 20 new export markets by 2022.

"Are we talking about the Fiji islands or India and China?" he asked.

In its 88-year ownership of Opel, GM never allowed the struggling brand to expand outside Europe -- notably barring it from entering the lucrative Chinese market.

The changes looming at Opel-Vauxhall carry echoes of the tough-love approach Tavares employed when he took the helm at PSA in 2014, bringing it back from the brink of bankruptcy by slashing staff, freezing salaries and cutting per-unit costs.

PSA last month already announced 400 job cuts through voluntary redundancies at Vauxhall's Ellesmere Port plant in England.

"As with PSA, the plan will help Opel survive, but it's going to hurt," Dudenhoeffer predicted.

source: AFP