Nick Reilly Named Permanent GM Europe Boss; Targets Full EV and Minicar Launch

General Motors (GM) has named Nick Reilly as the new permanent head of the company's European operations encompassing the Opel and Vauxhall brands. In a change to the two-tier management structure that GM has previously operated, Reilly will also become chief executive of the Opel and Vauxhall brands, giving him full control over the company's European brand portfolio, according to a Financial Times (FT) report. It is hoped that Reilly's appointment will provide the structure for Opel and Vauxhall to forge an agreement with their various stakeholders, including the powerful German union bloc, the various European governments that host Opel and Vauxhall plants and the European Union (EU), over the future of the company. GM will be hoping that a deal will be able to be struck to see grants and loan guarantees approved to underpin the unit's medium- and long-term operations. On Friday (4 December) there were signs that the German unions which have opposed GM's decision to retain control and ownership of the company were showing signs that they will soften that attitude in order to work to secure the future of the company. Opel's works council leader Klaus Franz said both sides were, "united in the goal of making Opel/Vauxhall a successful company again." He also praised Reilly as "personifying the new GM." This came after Reilly also said that GM was willing to give workers a stake in Opel, create a profit-sharing scheme, and turn it into a joint-stock company. These were conditions that Franz said were necessary for the company's workers to agree to the plans.

Speaking at the weekend, Reilly said that the plans he was overseeing for the restructuring of Opel and Vauxhall's operations were "90 to 95% final". GM Europe is looking to cut around 8,300 jobs from its overall headcount of 50,000 workers. When Magna was formulating its plan for Opel and Vauxhall, the company's plans attracted attention from the European Commission which was investigating whether jobs had been guaranteed in the brand's German operations as a result of the German government offering to supply 4.5-billion-euro (US$6.8-billion) loan guarantees. EU ministers have asked the European Commission to examine GM's restructuring offer before they offer any aid. This will hopefully speed up the process and prevent a lengthy investigation of financial aid packages or loan guarantees offered by governments after the event. GM is still focusing on winning loan guarantees from the German government but the new German finance minister Rainer Bruederle has taken a hard line on offering financial backing to GM. The German government was left hugely embarrassed by GM's decision to abandon the sale process to Magna, having heavily backed the bid. Bruederle's latest pronouncement was that Germany needed to "evaluate carefully" whether it wants to help Opel. The restructuring plan will be submitted to the European Commission, with European finance ministers wanting to know whether a restructured Opel is properly viable.

According to an Automotive News Europe report, Reilly also outlined future model plans for Opel which included a new city car, which could rival models like the Smart ForTwo and the Toyota IQ in the A segment, the smallest passenger car segment. Reilly said that the new minicar was a "top priority", while the company is also looking to launch a fully electric model, which could also be based on the planned A-segment car. Reilly said there has been a shift in vehicle buying trends, with customers more accepting of smaller cars as a result of their lower running costs and emissions. He said, "In my view Opel needs a mini in today's market that will be our top priority." The fully electric model is likely to complement the new Opel Ampera plug-in hybrid which is the European version of the Chevrolet Volt. Reilly stated that the Ampera will initially be imported from the United States when it goes on sale in 2011, before European production of the model commences. The company's Ellesmere Port facility in the United Kingdom is a possible production venue for the model according to Reilly, but other venues are also under consideration.

Outlook and Implications

Reilly's appointment would appear to be a sign that the unit's parent company in the United States is making a serious attempt to turn around its European operation and provide stable foundations for growing the business after arguably the most difficult year in the company's history. Reilly's announcement means that GM has abandoned its search for an outside candidate to head up Opel after Carl-Peter Forster left the company last month as he bitterly disagreed with GM's U-turn on selling Opel and Vauxhall to the Austro-Canadian automotive components giant Magna International. Before taking on the full-time GM Europe role, Reilly was executive vice-president and president, international operations. In the past he has also successfully led the GMDAT operation in South Korea, an outfit which increased in profitability, sales volume and strategic importance to GM under Reilly's tenure. He is also a former head of the Vauxhall operation in the United Kingdom. As a result he has an ideal range of experience to run Europe and he now faces the difficult task of securing the backing of the various union blocs and financial assistance from the national governments that host Opel and Vauxhall plants, while at the same time meeting the European Commission's legislative standards for government aid to private companies.

The new A-segment car and the proposed electric vehicle would give Opel and Vauxhall a very strong line-up in the lower end of the vehicle segments and in the low-emission category. It is likely that the new A-segment model will slot into Opel and Vauxhall's range below the existing Agila although its unclear whether GM will look to develop this model on its own, or find another OEM to act as a development partner and share the costs of the model. This has been an increasing trend in this sector of the market as a result of the low margins associated with small passenger cars with low price points.