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Opel's 'New Deal' outlined

2009-12-07 12:36
Frankfurt - The new head of Opel promised investments in new models and pledged to put an end to business as usual at the General Motors brand - addressing two key grievances by unions when he outlined his turnaround plan this weekend.

Newly anointed as Opel chief executive on Friday, Nick Reilly's first task will be convincing European governments to trust GM with about 3.3 billion euros ($5 billion) of their taxpayers' money to finance some 8 300 job cuts as part of a turnaround plan that would stanch all losses at the European carmaker by 2011.

In return, Reilly wants to encourage entrepreneurial spirit at Opel as quickly as possible by delegating most decisions to country heads and dismantling GM's bureaucratic style of centralized management that fostered a debilitating culture of passing the buck.

"It might seem obvious, but it isn't the way GM was managed and there was definitely some confusion about who was accountable," the 34-year company veteran told reporters this weekend.

"From the top line of revenue to the bottom line of profit, this is now the responsibility of the managing directors of the major entities," Reilly explained.

Local focus

Local operations will now be free to decide on nearly everything from manufacturing to sales, except for key central responsibilities such as product planning and development, that will be run by new Opel Executive Frank Weber.

"I would expect to present the (entire) management team probably next week," Reilly said.

With the new authority comes greater accountability, he said: "If people don't deliver then we're going to be pretty fast to move them on."

The German government had repeatedly frowned on offering assistance unless a new strategic investor took over the reins at Opel and had heavily backed a deal with Canada's Magna out of fear Detroit could further damage Opel.

In fact, Reilly's ideas strongly reflect the way Magna is run, which started out as a one-man company in 1957 only to became the world's fourth-largest auto parts supplier due to a corporate culture that emphasized decentralized structures, sharing best practice, employee participation and risk-taking.

Funds for new models

After GM Chairman Ed Whitacre fired CEO Fritz Henderson last week and temporarily assumed his duties, the new strong man in Detroit scrapped the four-week search for a new Opel chief and asked Reilly to take up permanent residence in Ruesselsheim.

When asked about Whitacre's role, Reilly replied: "He's very engaged so I would not call him an interim CEO, I would call him a definite CEO ... as far as I'm concerned I regard him as there for a long time because that's the way he's acting."

Initially only an interim CEO himself until an outside replacement could be found, Reilly aroused deep suspicions among a hostile workforce when he first arrived in Germany last month, where he was seen as an outsider solely interested in restructuring the company before leaving for Shanghai again.

His primary responsibility remained running GM's international operations from China, where he chaired a South Korean unit that exports Chevrolets to Europe, a brand that Opel's unions say has grown at the expense of Opel.

The Welshman began his new day-job on Friday by trying to patch up ties with Opel's 25 000 German workforce, announcing at a massive staff meeting that no single product engineer would lose their job now that Detroit realized how important the development center in Ruesselsheim was for GM's future.

Image "somewhat damaged"

"In my view I think Opel does need a mini in today's market, so that will be a top priority," Reilly told reporters, adding he decided to allocate an additional 250 million euros to its budget to plug up "a couple of gaps" in the model range.

Reilly also wants to finish talks with Renault in the next few months over whether to continue jointly building delivery vans in Luton near London after 2013.

"We need to clarify exactly how we go forward in light commercial vehicles, because we have built up quite a reasonable business there and we have to know exactly how we go forward - whether it's with partners or whether it's on our own," he said.

Nevertheless Reilly believes Opel's main problem was not churning out the wrong models that quickly gather dust in dealerships - much like some of the gas guzzlers GM sells in the United States - but repairing its rusty, beaten-up corporate image.

"It's more a matter of regaining the trust of potential customers who may have now taken Opel off their list not because there is anything wrong with the product, but just because the company image has been somewhat damaged," he said.

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