As General Motors’ decision to discontinue offering mainstream Chevrolet vehicles in Europe begins to settle, some facts and numbers are beginning to emerge surrounding the decision.
For starters, the development marks a sharp reversal in GM’s global Chevrolet strategy, where The Bow Tie brand was meant to be The General’s globally-available volume brand. It is worth noting that Chevrolet won’t disappear from Europe entirely, as it will continue selling cars like the Corvette:
“For Chevrolet, it will allow us to focus our investments where the opportunity for growth is greatest”, said GM CEO Dan Akerson.
Even then, Chevy’s sales volume is likely to diminish even further from the already-minuscule sales numbers it has been posting in Europe before the announcement. Even so, Chevrolet’s withdrawal will not affect GM’s plans to break even in Europe by mid-decade. Sadly, however, GM has posted losses in Europe every year so far this century, including $499 million in the period from January 2013 to September 2013, an improvement from the $1.2 billion lost during the same time period in 2012.
Pulling Chevrolet out of Europe will result in the automaker recording net special charges between $700 million and $1 billion in the fourth quarter of 2013, with the amounts including a $300 million in non-cash charges. In addition, GM mentioned that it will “incur restructuring costs related to these actions” that will reduce the earnings of its International Operations (GMIO) unit in 2014. Given that GM Korea is part of GMIO, something tells us that GM Korea will be negatively impacted.
Illustrating the disparity between Opel-Vauxhall and Chevrolet in the region are the following sales numbers: Chevrolet sales in Europe fell 18 percent through October 2013 to 121,621 units, while Opel-Vauxhall sales dropped 3 percent to 702,481 units. According to GM, the reason behind GM’s decision to drop Chevy in Europe is that it competed directly with Opel-Vauxhall in the mainstream segment.
By removing Chevrolet, GM supposedly clears the way for Opel to be more successful. However, there is an argument to be made that the paltry 121,621 Chevy sales in Europe didn’t prevent Opel from being successful in the first place, and that by dropping mainstream models from the Chevy lineup in Europe, GM will lose (most of) those sales to the competition.
Notably, the greater majority of Chevrolets sold in Europe are built in GM’s plants in South Korea — an area where General Motors has been in active (and sometimes non-fortuitous) negotiations with unions. Given that Chevys built in Korea will no longer be exported to Europe, GM will likely need to trim Korean production output, but the automaker has yet to comment on whether it plans on closing any plants, or making changes to production shifts, as a result.
GM did, however, say in a news release that it would “increase its focus on driving profitability, managing costs and maximizing sales opportunities in its Korean operations as the company looks for new ways to improve business results in the fast-changing and highly competitive global business environment.”
And now for some irony: GM will continue selling Chevrolet vehicles alongside Opels in Russia. That’s because both Opel and Chevrolet brands are strong in the country, and are seen as distinctly separate with their own intrinsic values.
Some more irony: GM will continue its seven-year $600 million sponsorship agreement with European soccer club Manchester United to promote Chevrolet. Supposedly, this is thanks to the team’s strong following in the Chinese market, where Chevy is attempting to grow sales. The biggest part of the sponsorship will come in a year, as the Chevrolet logo will be featured on the Manchester United shirts for the 2014/2015 season.
The GM Authority Take
GM has tried to succeed in Europe by offering both, Opel-Vauxhall and Chevrolet. In doing so, it hasn’t necessarily failed, but it didn’t achieve stellar success, either, likely thanks to the terrible reputation GM bestowed upon Chevrolet in the region by selling rebadged Daewoos in the 90s and early 2000s.
All that is to say, let’s see if The General will be able to succeed in Europe with just Opel-Vauxhall… and Cadillac, of course.