Europe’s auto capacity is staggeringly underutilized, as political pressure to protect jobs stacks overcapacity upon overcapacity. Analysts lay out the gory details at Automotive News [sub]: Global Insight says European production capacity is currently at 59 percent, while PriceWaterhouseCoopers figures excess production is 6.8 million vehicles. Assuming an average production of 300,000 units per plant, over 20 of Europe’s 100 major auto plants will have to go to bring supply back in line with demand. Though Saab’s seemingly imminent closure should take a first step towards a European coming-to-terms with its unreformed auto industry, the Opel deal is starting to look like an opportunity that GM could be too state-aid-dependent to take advantage of.

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Last year, Porsche gave Magna an eight-year contract to build the Cayman and Boxster models from 2012 on. Then Porsche went to Volkswagen. Then Opel came. VW was miffed and said “us or Opel.” When Magna’s Opel deal went poof, VW said Magna can come home, all is forgiven. Apparently not quite. Volkswagen (or Porsche, hard to say these days…)  want to use the factories of bankrupt Karmann which Volkswagen had bought and cancelled the contract. Magna cried foul and wanted money.

Now, the matter is official, writes Automobilwoche [sub].
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Nick Reilly, head of Opel, or rather General Motors Europe, which supposedly doesn’t exist anymore, wants to be Superman.

In an interview  with the Financial Times, Reilly said that Opel should shoot for an operating profit margin of 4-5 percent within four years, if not earlier.

In the world according to Reilly, Opel will perform like this: Opel will face “another tough” year in 2010, when Europe goes on C4C withdrawal. Reilly sees Opel to break even by 2011 and make a “decent” profit from 2012.

Says Reilly: “If we are successful we should be at least 4-5 percent. Four to five per cent gives a good return on investment and capital … It shouldn’t take more than four years.”

Industry insiders think Reilly is hallucinating.
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What is the future of Opel? Here is the version of GM Europe’s interim-turned-permanent chief Nick Reilly. He gave an interview to Germany’s auto motor und sport magazine.  (Interview in the print edition, not available on-line.)

Of course, Opel according to Reilly will aggressively gain market share: “We are confident that we can not only maintain but also expand our market share in Europe.”

Opel currently holds a 6.5 percent share of Europe. Reilly wants to see that to “rise to 10 percent and beyond in the medium range.” And how will that come to pass?
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We and most of the European press had reported that GM Europe would give up their strange headquarters in Zurich, Switzerland, and move the whole shebang to Rüsselsheim, Germany, where Opel resides. Not quite, said an Opel spokesperson to Germany’s Autohaus. From Rüsselheim “all functions of Opel and Vauxhall will be directed,” said Andfreas Kroemer of Opel. In Zurich remains the headquarters of Chevrolet Europe.

And what about GM Europe?
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GM was supposed to have a restructuring plan for Opel in place by the end of December, but it’s looking like that deadline is DOA. In a blog post at GM Europe’s “Driving Conversations” blog, GME supremo Nick Reilly explains:

While it is indeed exciting to see that things are coming together, bear in mind this is going to be one of the largest, most complex industrial reorganisations in European manufacturing in years. It will affect thousands of people and their families; impact plants and other stakeholders.

We are determined to do this right. We must do this right. Although we had hoped to have the new business model finalised in December, it appears that more work needs to be done and further consultations will not be rushed.

I said earlier that we would have a plan in place by year-end. Now it looks like an announcement may slip into January. This is not a broken promise. It is a pledge to do something right.

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News that GM is selling a control-shifting single share in GM Shanghai to its Chinese partner SAIC was the toads-from-heaven flourish at the end of an epic week for the RenCen. The day after the last of GM’s lifer CEOs left the building, Opel’s CFO followed suit. One management re-organization and a rough LA Auto Show later, came this symbolic surrender of GM’s largest market for a measly $85m. Accompanied by news that The General would buy out Suzuki’s stake in CAMI for an estimated $46.5m, no less. Oh yeah, and something about India. Freshly-minted CEO and notorious rattlesnake killer Ed Whitacre isn’t about be accused of not trying to shake things up. The only question is where will everything land?

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GM’s new European Viceroy, Nick Reilly, surprised and astonished the participants of a Saturday conference call by saying that German aid, or no German aid to Opel, “it won’t make any difference to our restructuring plan, so it will not lead to more layoffs in Germany or less layoffs.”

Now what’s that all about? Wasn’t the line before “you either pay us, or you pay unemployment benefits, anyway, you’ll pay?”
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GM (probably with a little prodding from their buddies and new Chinese overlords at SAIC) realizes where the real value at Opel is: At the Opel Engineering Center in Rüsselsheim.

After yesterday’s press conference in which he had announced the ties with a stronger SAIC in China and India, Reilly spoke to 9,000 employees at Opel’s Rüsselsheim headquarters, Reuters reports.

The good news: 548 engineering jobs at the engineering center, formerly slated to be eliminated, will stay. The bad news?
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Fresh details on GM’s Asian wranglings are coming in, and it seems that SAIC paid The General a mere $85m for the one percent needed to control the joint venture. GM’s Nick Reilly tells the New York Times:

the 51 percent stake would give S.A.I.C. the right to approve the venture’s budget, future plans and senior management. But the venture has a cooperative spirit in which S.A.I.C. has already been able to do so… S.A.I.C. wanted to have a majority stake to consolidate the venture in its financial reporting

Which is about as credible as the conclusion that the Shanghai and India deals are going to provide GM International with a meaningful amount of cash with which to rescue its European and Korean divisions. As it turns out, the Indian deal isn’t going to translate into free cash for GM. GM and SAIC will set up a joint Hong Kong-based investment company, which GM will give its Indian operations and SAIC will fund with $300-$530m, bringing its overall value to $650m.

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The departures from GM are piling up fast. After CEO Fritz Henderson was ousted yesterday, MarketWatch reports that Opel’s CFO Marco Molinari has left the firm. This completes a gutting of GM’s financial operations, that includes the departure of GM International CFO Joe Peter, and the any-day-now departure of GM CFO Ray Young. Like the GM mothership, Opel is now without a permanent CEO and CFO. GM CEO and Chairman Ed Whitacre has a ton of hiring to do, and fast.

The car business and the news surrounding it have their seasonality (hence the SAAR.) As far as the news is concerned, we must have reached the “soak” part of the news cycle. It can only spin faster, or we should all take a vacation. Read on if you suffer from insomnia …
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Roland Koch, the premier of Opel’s home state Hesse is pissed. GM’s plans to cut 2,500 jobs there are “completely unacceptable.” Koch said that Nick Reilly had told him just 24 hours earlier that GM’s restructuring plan would “in principle” orient itself on job cuts agreed with Canada’s Magna.

We know what Reilly will say. The Magna plans called for 10,000 cut jobs all over Europe, GM wants to cut only 9000, so “in principle” that’s a better deal. Except for the Germans.
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No wonder GM decided it couldn’t give up Opel… it would have lost Buick as well! Expect this Buick Excelle (a rebadged Opel Astra in the style of the new Regal) to arrive in the US under a different name (and probably in sedan form only) around the 2012 model year.

European governments that are lured into propping up GM’s Opel should resist the urge, said former Continental AG Chief Executive Officer Manfred Wennemer to Bloomberg. Why? It will cost them twice.
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