Opel CEO Warns 2016 Profit Target at Risk Amid Market Headwinds
Karl-Thomas Neumann has cautioned senior management that Opel and Vauxhall may miss their 2016 profit goal, citing pressure from weak European and Russian sales.
Opel’s chief executive, Karl-Thomas Neumann, has warned senior managers that the company’s 2016 profit target is in jeopardy, highlighting ongoing challenges in key markets and persistent cost pressures. According to a report in the German daily Bild, Neumann outlined his concerns in a letter to around 300 top managers, pointing to “strong headwinds for 2015” and stating that Opel’s next phase, dubbed ‘Profitability 2016’, is “by far not secured.”
General Motors has made returning its European operations to profit a priority after years of losses. Opel and its UK counterpart Vauxhall have endured around $18 billion in cumulative losses over the past 12 years. The company’s latest turnaround plan set a target to break even in Europe by 2016, following the withdrawal of Chevrolet from the region to focus resources on the two remaining brands.
Neumann’s warning comes as GM’s European arm faces a tough market environment. Russia, Opel’s third-largest European market, has seen sales slump amid economic instability and currency fluctuations. Broader European demand has also remained sluggish, putting further pressure on volumes and margins. The letter cited by Bild made clear that the path to sustained profitability is threatened by these external factors.
GM’s European strategy and the pressure on Opel
The decision to pull Chevrolet out of Europe in 2013 was intended to concentrate GM’s investment and marketing efforts on Opel and Vauxhall. This move was billed as a way to give the two brands a clearer identity and a better shot at recovering market share. However, persistent weakness in several European economies and the sharp downturn in Russia have complicated the recovery.
The company’s internal targets include not just a return to profit by 2016, but also a medium-term goal of achieving a 5% EBIT margin by 2022. With the latest warning from Neumann, the near-term goal is now under threat, raising questions about the longer-term outlook as well.
Impact for workers and future plans
The warning on profitability has immediate implications for Opel’s workforce and management. Previous cost-cutting rounds have already seen plant closures, such as the confirmed shutdown of the Bochum factory in 2016. While Neumann’s letter did not announce further restructuring, the uncertainty over profits may put additional pressure on jobs and future investment in the region.
Despite the difficulties, Opel continues to launch new models in an effort to regain momentum. The 2016 Astra, for example, is part of the product-led recovery strategy. For more on the new Astra, seeOpel Unveils 2016 Astra Sports Tourer with More Space and Efficiency.
What’s next for Opel and Vauxhall?
With the 2016 profit target now in doubt, GM’s European leadership faces renewed scrutiny. The success of new models and the ability to weather external economic shocks will determine whether Opel and Vauxhall can finally reverse more than a decade of losses. For now, Neumann’s warning signals a difficult road ahead for the brands and their workers.
