Boston, MA 04/16/2014 (wallstreetpr) – General Motors Company (NYSE:GM) expects to return break even from its beleaguered unit Opel by 2016 and anticipates profit in next year. The European unit was going close in 2009; however, GM dropped the plan and focused on the revival with new products.
Opel’s issues
Issue 1: Europe market has limited potential for small cars and Opel intends to target only to those niche segments. It makes difficult for the company generates enough revenue to sustain the margin.
Issue 2: Opel only targets the local market (Europe) instead of developing countries that have high growth potential. There is hardly any market for small cars in Europe that reduces revenue growth and affects profitability significantly.
Issue 3: General Motors Company (NYSE:GM) has witnessed loss of $18 billion in last 12 years due to frequent change in top leaders. It has a significant impact over growth due to lack of strategy to sustain in a competitive market with weak economic conditions.
Reinforcement for Opel
In April 2013, GM plans to invest ~$5.5 billion to revamp Opel’s products by 2016. It includes investment in Germany and Europe to bring back old products along with 23 new products and 13 new engines to continue with European sales.
Opel’s outlook
Economic recoveries in Italy, Spain and Portugal boost the demand for mass market brands. So, gradual increases in demand open opportunities for car makers to expand. As a result, car sales increased by 7.6% during February 2014 as industry report that leads a growth of 12.3% for GM.
In the last quarter ended in December 31, 2013, GM posted moderate growth with 371K vehicles including 252K Opel models sold In Europe. Opel reported ~7% increase in volume and expects to generate more sales in coming years.
General Motors Company (NYSE:GM)’s Europe improved its adjusted operating loss to $345 million in 4Q2013, compared to high loss of $761 million same period last year. Earnings are improving gradually with increasing sales over GM’s vehicles and continue to improve further in coming periods.
