Prepared remarks by Dan Akerson
General Motors Chairman and CEO
Opel Town Hall
Russelsheim, Germany
Thursday, Nov. 15, 2012
(Speaker’s words are definitive)
Thank you for that welcome.
I am very glad to have the chance to be here with you.
I’ll keep my formal remarks brief because there’s no shortage of things to discuss and I want to ensure that we have a very good dialogue. After that, I look forward to your questions.
Let me start by sharing a few insights into GM’s financial results.
A little more than two weeks ago, we announced earnings that surpassed the expectations of stock market analysts, and our investors.
As a company, we have now delivered 11 consecutive profitable quarters. This marks our longest uninterrupted profit streak in more than a decade, and it stems from our geographic diversity, stronger brands and the financial rigor we are instilling in the business.
However, only four of our five business units were profitable. Our third quarter losses in Europe increased by about $200 million year over year, and we’re on track to lose about $1.5 billion to $1.8 billion in the region this year.
The fact that we lost money in Europe was expected by everyone.
What was unexpected was our announcement that we are targeting breakeven financial results on an EBIT-adjusted basis by the middle of the decade.
At the same time, we announced that GM is targeting full-year EBIT-adjusted in Europe to be slightly better in 2013 than in 2012.
Another positive surprise was the fact that we reduced our finished goods inventory by about 22,000 units or $400 million from the second quarter of 2012. This helped Europe’s cash flow turn slightly positive for the quarter.
More importantly, reducing our inventories and keeping production in line with demand is going to help us preserve our pricing power and avoid brand-damaging discounts like those offered by some competitors.
[Short pause]
Before we move on, let me stress that achieving breakeven results by mid-decade is our target – not a promise. We still have to execute our plan against stiff headwinds.
Like most auto companies, we expect that the weakness in Europe will continue to impact our business and the industry for the next several years. But unlike some forecasts, ours is built around conservative volume and revenue assumptions. In other words, we’re counting on our own hard work – not an economic recovery – to drive the business forward.
Our targets resonated powerfully with analysts and investors, many of whom believe that losing money at Opel year after year is something we have come to accept as normal. We’ve certainly acted that way from time to time – whether consciously or unconsciously.
Our protracted losses have even prompted some analysts to argue that we should sell Opel or simply close up shop and leave car sales in the region to others.
I’m not about to do that.
As global auto company, GM needs a strong design, engineering, manufacturing and sales presence in Europe. There’s room for Chevrolet in Europe but Opel fulfills that role. We want both brands to grow profitably.
Recommendations that we “cut and run” show you that some people simply do not see how important Opel is to our success.
They aren’t paying attention to the fact that Opel will once again sell more than one million vehicles this year despite the severely depressed markets in most of Europe.
They also overlook the key role Opel and the ITDC play in GM’s global product development plans, and Opel’s expertise in CO2 reduction and other technologies that have application around the world.
Critics are also missing the very real progress we have made to increase our revenue and lower our breakeven level.
You’ll notice that I said “we” and not “you.” That’s because Drive Opel 2022 is our plan – not the “Detroit plan” or the “Russelsheim plan.” We are all in this together.
[Short pause]
When I addressed our investors, I said there were “green shoots” sprouting at Opel. They include a 500 Euro per unit improvement in Astra profitability, the overwhelmingly positive reaction dealers and customers are giving the ADAM and the Mokka, and a $300 million improvement in fixed costs this year.
We have also signed a logistics agreement with Gefco that takes effect in 2013, and we are close to finalizing a joint purchasing agreement with PSA. These initiatives will give us economies of scale that we lack today.
All of these hard-won accomplishments are setting the stage for the next phase of our revitalization. The centerpieces – as they should be – are new products.
There are no less than 23 new Opel vehicles and 13 new powertrains coming between early 2012 and the end of 2016, and they’re all designed to compete and win.
Make no mistake about it. If our intention was to simply declare Opel bankrupt, or let it drift until the economy rebounds, we wouldn’t be wasting our time and money with these investments. We also wouldn’t have been able to recruit senior executives like Alfred Rieck and Michael Lohscheller from our competitors.
These executives and others like Thomas Sedran have come to Opel because they are confident in our plan, and they see the long-term potential that exists when Opel’s great products are married to a competitive cost structure and the right “go to market” strategy.
Let me pause now and ask you a question. Do you think Opel can succeed?
If you do, here’s what it’s going to take.
First and foremost, it will require the commitment of the entire organization to delight our customers.
The “Thrilled or Just Return It” program is a step in the right direction because it telegraphs our confidence in products like the Astra and the Insignia.
Of course, we are proud parents of Opel vehicles. But the experts and customers love them too.
For example, the Zafira Tourer just won the Golden Steering Wheel award presented by BILD am SONNTAG and AUTO BILD.
However, we must back up our confidence with excellent quality, durability and customer service.
Next, we must remain open to new ideas, even if they are unconventional or untested, like our alliance with PSA.
The fact is we lack economies scale in critical areas and if we can achieve scale by partnering with PSA, that’s what we are going to do.
Finally, we must continue to earn the trust of our colleagues, suppliers, dealers and the works councils in everything we do. We all know that the European auto industry is facing its most serious crisis ever, and while the worst of the sovereign debt crisis may be over, the economic outlook is for more tough times ahead.
Without honesty, candor and trust, we won’t be able to meet these headwinds, execute our product plans and find the right solutions to our internal challenges, such as costs, complexity and capacity.
At the same time, I want you to maintain a sense of urgency because we are clearly moving in the right direction and success breeds success.
[Short pause]
Some of you may remember Opel’s record profits in the early 1990s. But I’m guessing many of you have never worked for a consistently profitable Opel/Vauxhall.
I want to change that as soon as possible – and start growing Opel. That is our common goal and I want you to share my message with all of your co-workers who couldn’t join us today.
Come from behind victories are never easy. But I know that if we keep our focus, commitment and loyalty to each other, we’ll get the job done.
Thank you. Now I’m happy to answer your questions.
[END]
