General Motors has just announced a complete about-face of its European market strategy related to the Chevrolet and Opel/Vauxhall brands.
Starting in 2016, the automaker’s Chevrolet brand will no longer have a mainstream presence in Western and Eastern Europe “due to a challenging business model and the difficult economic situation in Europe.” Instead, the fourth-largest global automotive brand will focus on offering “select iconic vehicles” such as the Corvette in Western and Eastern Europe. Chevrolet will, however, continue to have a broad presence in Russia and the Commonwealth of Independent States.
The move, according to a GM news release, will “improve the Opel and Vauxhall brands and reduce the market complexity associated with having Opel and Chevrolet in Western and Eastern Europe.” Given that in Russia and the CIS the Opel and Chevrolet brands are “clearly defined and distinguished”, they are more competitive within their respective segments.
The change in business strategy marks a significant departure from the action plan from a year ago, when The General intended to turn Opel/Vauxhall into a slightly more premium mainstream brand and make Chevrolet the value brand in Europe. The news coincides with GM’s announcement to grow the Cadillac brand in Europe.
To Accelerate Progress
The General is characterizing the change as a way to “accelerate its progress in Europe by bolstering its brands in the mainstream” segment. The automaker also added that Chevrolet will work closely with its dealer network in Western and Eastern Europe “to define future steps while ensuring it can honor obligations to existing customers in the coming years.” One of these obligations is supplying parts and providing warranty work to existing Chevrolet owners — something that GM fully intends on carrying out and making available in the affected markets.
“Our customers can rest assured that we will continue to provide warranty, parts and services for their Chevrolet vehicles, and for vehicles purchased between now and the end of 2015,” said Thomas Sedran, president and managing director of Chevrolet Europe. “We want to thank our customers and dealers for their loyalty to the Chevrolet brand here in Europe.”
The newfound strategy as it relates to Chevrolet “will allow us to focus our investments where the opportunity for growth is greatest”, said General Motors CEO Dan Akerson.
Given that most of the Chevrolet product portfolio sold in Western and Eastern Europe is manufactured in South Korea, GM will increase its focus on “driving profitability, managing costs and maximizing sales opportunities in its Korean operations” as it looks “for new ways to improve business results in the fast-changing and highly competitive global business environment.”
“We will continue to become more competitive in Korea,” said GM Korea President and CEO Sergio Rocha. “In doing so, we will position ourselves for long-term competitiveness and sustainability in the best interests of our employees, customers and stakeholders, while remaining a significant contributor to GM’s global business.”
Special Accounting Charges
As a result of the decision to no longer offer Chevrolet vehicles in mainstream segments in Western and Eastern Europe, General Motors expects to record net special charges of $700 million to $1 billion primarily in the fourth quarter of 2013 and continuing through the first half of 2014.
The special charges consist of asset impairments, dealer restructuring, sales incentives and severance-related costs that will “pave the way for continued improvement in GM’s European operations through the further strengthening of the Opel and Vauxhall brands”. Approximately $300 million of these net special charges will be non-cash expenses.
Additionally, GM “expects to incur restructuring costs related to these actions that will not be treated as special charges, but will impact GM International Operations earnings in 2014.”