Opel profits plunge despite record output

FRANKFURT - Opel, the German subsidiary of General Motors, saw 1992 pre-tax profits plunge DM1.25bn to DM448m despite a record production of 1.1 million units during the year, writes John Eisenhammer.

Group sales rose to DM29.2bn in 1992 from DM27.2bn the previous year. David Herman, the management board chairman, said the main reasons for the dive in profits were the heavy investment in the new lean- production plant at Eisenach in eastern Germany, currency losses, and further write-offs due to participation in the Swedish car maker, Saab.

Mr Herman delivered another broadside at the unacceptably high costs of producing in Germany. 'The only thing I know is that even though we still invest here, we are no longer competitive,' he said. He described Opel's core plant at Russelsheim in western Germany as the 'most expensive in the GM group'.

Given that Germany's productivity lead is now paper-thin, such competitive disadvantages can no longer be afforded, Mr Herman said. To make up for them and overtake other European rivals, Opel plants will have to realise productivity gains over the next five years of between 11 and 16 per cent annually. 'This cannot be achieved by traditional means,' Mr Herman said, promising a radical and continuous improvement on all fronts.

The tradition of paying generous fringe benefits will have to be cut back, and the workforce, which totalled 53,000 in 1992, will be down to 48,000 by the end of next year.

Mr Herman said Opel would find it very hard to make a profit in 1993. He said sales were down 18 per cent in the first five months of the year and there was no reason for optimism about an improvement in the second half. 'We shall have to continue to adjust our production to the still sinking demand,' he said.

Registration of new Opel cars fell by 21 per cent in the first half of 1993. Orders have fallen to the level of mid- 1990, before the unification boom. 'We have not yet reached the bottom,' Mr Herman said.