GM Vice Chairman Stephen Girksy has recently called Opel’s latest turnaround effort a failure.
Having recently replaced Nick Reilly as Chairman of Opel’s supervisory board, Girsky was quoted by the Financial Times as saying the following in New York: “Unfortunately, our plan for making Opel profitable this year did not work.” Girsky was also cited as saying that Opel’s new CEO Karl-Friedrich Stracke is working out a new plan with the division’s management team.
Business analysts in Europe have reported that GM’s patience for turning Opel around is dwindling. The unit contributes significant engineering and technology expertise to the greater General Motors organization, but has insofar failed to make money on its own due to its dependence on expensive European production. Recently, Opel has been in search of ways to increase its sales volume by expanding to international markets such as Australia, South America, and China.
Yet another reason for the lack of Opel’s success involves the lack of a premium division such as VW’s Audi — which realizes significant profit margins. Last we heard, however, Opel was supposed to move upmarket in its own right and align with its North American counterpart, Buick.
Recently, it was discovered that GM’s decision to keep Opel during its bankruptcy restructuring efforts in 2008 and 2009 was mostly Girsky’s efforts: he convinced GM’s board against selling the unit to a group formed by the partnership of Canadian parts supplier Magna and Russian mega bank Sberbank. Girsky has reportedly been tasked with drastically reducing costs for Opel — a formidable endeavor given the uncertainty of the firm’s dominant operating currency — the Euro.
The GM Authority Take
Opel is not working — and Girsky, the man responsible for GM’s keeping of the division, seems to be the last straw in turning it around. But we can’t forget what we believe to be the primary reason for GM not selling Opel in the first place: without it, The General’s market share would be significantly reduced. Chevy is just coming out of being a destination for craptastic bow tie-wielding Daewoos while Cadillac doesn’t even register as a blip in Europe’s luxury vehicle sector.
Maybe the ultimate sale of Opel to another company wouldn’t be such a bad idea after all, possibly forcing GM to put all of its eggs into the Chevrolet and Cadillac baskets?
Source: Reuters
Comments
Expand Opel to North America, lol. Can’t hurt.
Work out a new arrangement with the unions
At this point, given Europe’s shakey financial condition, GM could extort some $$$ out of Germany to keep production there. Or, and this is my favorite, place Opel into bankruptcy, delete a quarter of their Euro workforce and move production to the US. Production is much less expensive in the US and the Germans certainly haven’t demonstrated any loyalty to GM – even though this current mess is entirely Opel’s fault because of their need for “autonomy.” Clearly, German independence from Detroit has not worked.
And how, exactly, are you going to convince cynical European consumers to buy Opels made in the US? As mentioned before, Chev and Cadillac are virtually unknown in Europe and in some case are avoided because of the stigma of “Made in America”. Adding Opel to that equation will only make things worse.
Sure, they buy X5’s from Alabama, but even they know the difference between an Opel and a BMW.
I understand where you are going – certainly it would be difficult. But, as stated, Opel isn’t making any money – could it really get any worse? The profit margins would increase significantly, hopefully off setting any Euro resistance. Additionally, GM could use some of the production savings and pump it back into the product. Additional features, technology, etc – perhaps that would assuage the cynics? But, again, Europeans are not buying enough Opels anyway. One way or another looks like a tough road ahead….
The real problem is not Opel, but GM. In this company Opel acts only as a brand, the parent company can rotate the numbers just the way they want. So they can leave Opel´s development centre work for free for Chevrolet, but the engineers are still paid by Opel -> loss. In some countries Opel cars are sold and built as Buicks or Chevrolets, without that Opel earn money thus or at least get cash payments by licensed. The foreign markets buy these cars for a significantly below manufacturing costs, but at Opel run at the full cost-> loss. In addition, of course it is clear that the Western European market is too small to be really profitable. Most of VW brands are expanding their business in other regions, where they can compensate the costs. Due to the limitation by GM that Opel cannot sell itself in most boom countries like China or India, the number of units under the Opel brand are too low -> loss. (In truth, GM is building more Opel cars around the world than Opel is selling in Europe. For example, take all the sales of Opel models sold under the Chevy brand in Brasil to Opel, so then you see the whole quiet different. I gues, most of you forget that Opel is an operating company, even as a GM subsidiary! GM gives Opel hard conditions, so that an export does not pay in reality.
@Production is much less expensive in the US…
Really? Take a look at the price list of the new Lancia Thema or the Opel Ampera. American import cars sold in Europe are more expensive than a European or even a German built car. If GM wants to reduce costs they will built cars in South Korea or Mexico! It doesn´t make sense to to built Corsas or Astras in oversea, if the sales are about 200000 vehicles a year.
Lots of good facts here from colcmras. I partly agree.
GM has restricted Opel in many ways, yet needs Opel badly it seems, as most Buicks are just tweaked Opels and GM doesn’t shy away from touting it’s “German engineering” in Buick commercials. Since so much R&D comes from Germany – it seems it would behoove GM to keep Opel and expand it into China and India.
Cheers,
James