Opel Targets Profitability by 2020 -- Update
November 09 2017 - 5:29AM
Dow Jones News
By Max Bernhard
German car maker Opel said Thursday that it plans to return to
profitability by 2020, but will refrain from plant closures or
forced layoffs.
The company, acquired by Peugeot SA (UG.FR) in August, said it
would create a "profitable business model whatever the headwinds
may be." By 2020, it expects to have positive operational free cash
flow and an automotive-recurring operating margin of 2%, rising to
6% by 2026.
Peugeot bought Opel from General Motors Co. (GM) earlier this
year. Since then Peugeot and Opel managers have been working on a
restructuring plan for the German car maker, which hasn't been
profitable since 1999.
Opel Chief Executive Michael Lohscheller said that the "status
quo is not an option," and the company would seek to decrease costs
in all areas.
Peugeot itself has proven it can return to profit, and there was
no reason that Opel wouldn't be able to deliver, said Mr.
Lohscheller. To return to profitability, Opel plans to reduce its
break-even point--the number of cars sold at which it starts making
a profit--to 800,000 vehicles.
In a call with journalists, Mr. Lohscheller said the current
break-even point was "absolutely too high," but didn't specify a
number.
Opel said it aims to move the company toward the industry
benchmark in terms of its labor-cost-to-revenue ratio by reducing
complexity. The company said it intends to maintain all plants and
refrain from making forced layoffs in Europe. Instead, it will
implement new working-time concepts, voluntary-leave programs and
early-retirement plans.
Opel said efforts to cut costs would be implemented in a
"responsible and thoughtful" way and the company is in talks with
major unions. In October, Opel said it would eliminate up to 400
jobs at its Vauxhall Ellesmere Port plant in the U.K.
The number of platforms Opel uses for its cars will be cut to
two from nine by 2024, and the number of powertrains to 4 from 10,
it said. Its Ruesselsheim site will become a research and
development center for the Peugeot group.
Opel plans to gradually switch to Peugeot's technology and power
units, rather than GM's, by 2024 at the latest. It expects annual
synergies for the Peugeot group of 1.1 billion euros ($1.3 billion)
by 2020 and EUR1.7 billion by 2026.
As part of the strategy, Opel will offer electrified versions of
all its passenger vehicles--either as battery electric cars or
plug-in hybrid cars--by 2024. The company has aimed to put four
electrified cars on the market by 2020. Opel also said it plans to
enter more than 20 new export markets and double its overseas sales
by 2022.
Write to Max Bernhard at Max.Bernhard@dowjones.com;
@mxbernhard
(END) Dow Jones Newswires
November 09, 2017 05:14 ET (10:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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