As much as we all like to talk cars and discuss their various qualities, features, and attributes, it’s important to remember that General Motors is a business — one that needs to make money in order to survive, thrive, and create better vehicles for the the people. Unquestionably, the biggest obstacle standing in the way of The General’s ability to do just this is GM Europe. Screw it, we’ll just come out and say it: Opel.
The General should have walked away from the brand when it had the chance. But now, it’s stuck in a bottomless morass, with only the hope of light (not even a glimmer) at the end of the tunnel.
A Loser From The Very Beginning
Opel has been a money-losing venture for more than the last decade — to the extent of $10 billion during the time period. Through countless cases of mismanagement and overall subpar governance, the unit has limped along — subsidized by its parent company. The division lost $747 million in 2011 and is on track to lose more than a billion green ones in 2012 — persisting to be a major drag on what is an otherwise very healthy GM.
What’s perhaps even more melancholy, though, is that GM had the chance to rid itself of the storied German brand over two years ago when it was going through bankruptcy. Somewhere along the line, someone (Ed Whitacre & Co). decided to keep the operation in the name of European market share, given that Chevrolet was (and still is) a very low-volume player in the region.
Today, GM is doing its best to turn Opel around. The division, which — like a corporate siren — has claimed the positions of countless executives, is said to be on track to break even by mid-decade. But for what?
What Is The Point?
What’s really the point of keeping Opel if it doesn’t contribute to the bottom line, while in the process requiring an enormous amount of effort and energy for the possibility of a turnaround? I say possibility, since there’s no guarantee that the efforts will pay off — by mid-decade, or ever.
Wouldn’t GM be better off to focus all that time, energy, and resources on creating better products, rather than trying to revive a failing business unit in the face of adverse economic conditions and a (German) government that refuses to play ball (mostly because of Opel’s American ownership)?
GM appears to think that the answer is “no”, as in it would rather continue beating the dead horse that is Opel. Doing so, however, will be at the expense of the global success of Chevrolet — GM’s true global mainstream brand. In effect, Chevy will have a more difficult time penetrating the Euro market thanks to Opel — turning the game into Opel versus Chevy.
Sure, Opel might have greater cachet, name recognition, and consumer mindshare… but it’s far from being profitable. So what’s the point of all that time and energy? Wouldn’t the smart thing be to dump it, and start over anew?
Still A Hostile Environment
But what makes us ask “what’s the point” even more is the fact that there’s still a very real, yet intangible feeling of “us vs. them” at Opel. At all levels, the corporate environment has been described to GM Authority by those familiar with the automaker’s operations as “hostile” and “counter productive”, as employees of the German brand seem to have a skewed perception of reality — one in which GM hasn’t owned the company for over a century.
For some reason, Opel folk are under the impression that GM is out to harm Opel, along with Germany (and possibly their family, and their family’s cow). The fact that GM has been subsidizing Opel’ monstrous losses… well, that’s a minor oversight.
What GM now has on its hands is a loss-making business unit at which it’s throwing everything and the kitchen sink, but tangible results are so far away (if not entirely impossible), that we don’t even see a reason to try anymore. In effect, Opel is:
- keeping GM from investing more than its competitors in R&D, process, human resources (compensation, development), and various other facets of the business — all of which result in the creation of better products
- keeping Chevy from the achieving higher sales volume (despite what some European car enthusiasts may think about The Bow Tie Brand — it’s possible)
- keeping talented GM executives and employees occupied on a failed project, all of whom can be focusing their energies on creating better products instead of playing political Stratego with Europe (read: Germany) and unions, or pinching pennies by forming partnerships with second-tier European automakers
- keeping GM’s stock price deflated, and investor confidence low
- wasting talent, time, and human resources that could be better used elsewhere
At the end of the day, GM would be better off without Opel. The automaker can easily transfer the proven R&D/engineering/design operations from Opel to GM (even open up an R&D office in Germany), then drop the Opel brand (and its baggage) altogether. That should have been done years ago… but today is still not too late. The short-term action plan should include a laser focus on Chevy globally, making money in Europe at a low volume (via high plant utilization), and growing from there. In fact, it will probably be faster to turn a profit by following this strategy than getting Opel into the black.
Come to think of it, Opel reminds me of a beautiful girl (since Opels are quite attractive) that doesn’t like to cook, clean, or work — but instead spends all of your money and puts you in debt as your labor away the day. Fritz Henderson was right. And don’t even get me started on Vauxhall.