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Opel ‘has a shot' at 2011 profitability, Reilly says

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Opel ‘has a shot' at 2011 profitability, Reilly says

June 23, 2010 06:01 CET

BILBAO, Spain (Reuters) -- Opel may return to profitability in 2011 and will work to win back the image that has been tarnished by months of uncertainty, CEO Nick Reilly said.

Speaking on the sidelines of the Automotive News Europe Congress here Tuesday, Reilly said a profit for General Motor Co.'s European unit was not feasible this year because of major restructuring costs.

Crisis-hit GM last year opted to keep Opel, backtracking on months of negotiations to sell it, and is now embarking on a drastic restructuring plan involving some 8,300 job cuts.

"This year we have huge restructuring charges, and we haven't taken the people out," Reilly said. "But next year I think we've got a shot at getting to breakeven or even a little better ... 2012 should be fine."

The automotive market generally is stronger than expected in 2010, Reilly said, despite a "hangover" effect in some markets where scrapping incentives have been phased out.

"The market is about a million units higher than we had predicted seven or eight months ago, and I for one don't see a significant double dip in the auto industry," Reilly said, referring to the prospect of another downturn following on the heels of a brief recovery. "Personally, I see a gradual, continual improvement."

Earlier this month GM dropped its request for European funding to restructure Opel, saying it would fund the revamp itself after government talks on loan guarantees dragged on.

No harm

Reilly said the decision to drop aid requests would not harm relations with the UK and Spanish governments, which had already agreed to help.

"It could have done but it won't because I personally called them up and explained why and they understood," Reilly said, adding: "They've been able to avoid giving a guarantee so they've got the gain without the pain."

However, the extended negotiations about loan guarantees had taken up too much time and resources and had put "far too big" a strain on the management team, Reilly conceded.

GM's strong balance sheet and return to profitability this year after bankruptcy undermined its requests for state aid for its European subsidiary, which includes Opel's British sister brand, Vauxhall.

Reilly said the company had no intention of dropping the Vauxhall brand. "We've been there a long time, we have a brand that's trusted, we have no intention of getting rid of it."

In Germany, the market in which Opel's reputation has suffered the most from the uncertainty of the past months, the company will have to work on rebuilding its public image, Reilly said.

"We have lost some market share in Germany," Reilly said. This could partly be explained by the end of the scrapping scheme in September which had benefited Opel, he said, adding: "But I would say this is an excuse. ... Yes, we do need to recover the image in Germany."

Opel would also need to work on winning back its reputation for reliability.

Said Reilly: "We did -- and this is kind of an admission -- have a reputation some years ago for reliability. I would admit that we have lost a bit of that reputation, but it's still there in the back of people's minds, and so we're going to bring it forward again."

Read more: http://www.autonews.com/article/20100623/ANE/306229947/1193#ixzz0rgcogNAS

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