Can GM help Opel get its sparkle back?

With parent company GM planning €4bn investment, the troubled brand has its sights set on getting back on top in the European market

The new Opel Insignia. Opel is hoping the marque will power the car maker’s resurgence

The new Opel Insignia. Opel is hoping the marque will power the car maker’s resurgence

Wed, Oct 23, 2013, 06:00

Opel has for some time now suffered under the curse of featuring on the business pages more often than the motoring ones. It has been hit time and again by falling sales, faced a collapsing market share and then the ignominy of a sell-off, aborted at the last minute, to a Russian-backed bid which sought to prise it away from its parent, General Motors. Even GM at times has been less than enthused about keeping Opel in the family.

GM has already culled several high-profile brands (Pontiac, Hummer and Saturn among them) on its road to recovery, so what hope has Opel got? The Russelsheim-
based brand (along with its UK-only Vauxhall sister marque) has racked up losses in the order of $1 billion (€727m) every year since 1999, and last year its sales fell by more than 12 per cent in a European market that was down by 8 per cent.


New market niches
The writing should be on the wall. Except it’s not. Or at least, if it is, then desperate GM and Opel executives are coming along every morning and frantically scrubbing it off. GM is planning to invest €4 billion in Opel over the next three years, bringing Opel and its US-China-focused brand Buick closer together.

It also hopes to bring Opel into new market niches. For example, Opel’s last dalliance with the SUV market was with the Antara, which failed to spark customer interest. However, its new mini-SUV, the Mokka, has exceeded its sales expectations, and Opel is already plotting another small 4x4, spun off from its Adam city car.

Given the circumstances of tumbling European market share and a failure to turn a profit for more than a decade, you would expect Opel’s Irish operations to be in crisis. But at the recent launch of the updated Insignia saloon, Opel Ireland managing director Dave Sheeran assured us it could not be further from the truth.

“At under 100,000 units the market certainly has its challenges at the moment,” he said. “We operate above break-even at the moment, and our network would be the same. That’s important, because you’ve seen the contraction in the networks recently, and the challenges that has brought. We’ve taken our fair share of pain along with everybody but we’re at the point now where it’s sustainable and from that point we grow. That’s what the plan is.”


Return to profitability
Sheeran continued: “Opel has a robust mid-term plan to return the brand to profitability in Europe by mid-decade. It’s very realistic; it also recognises the environment in which we operate, in the sense of a general European and global economy. GM is backing that plan with investment in product and powertrains, and it’s fully funded to support the plan. This year, the losses have been significantly reduced on last year, there’s a fair chance that the share for the first time in nine or 10 years will be positive in terms of year-on-year growth, and it’s the number three brand in Europe for passenger cars. So it’s a matter of executing the plan to bring it back to sustainable, profitable growth.

“You have to be brave. The whole business runs on product, so if you’re not producing new product, then that only leads to one place. At Frankfurt this year, you could probably tell that 2014 isn’t going to be a bumper year for new product launches, and that is possibly a legacy that has gone on across the board in the last few years as everyone feels their way through the economic troubles. But central to our plan was to keep investing in the product, and the new Insignia is a mark of that.”

For all the positivity that’s evident from Mr Sheeran, Opel has a mountain range of challenges ahead. Not only must it turn around more than a decade of losses and falling market share in Europe, it must do so while convincing buyers that its brand can be as desirable as Volkswagen – no easy task for incoming international marketing chief Tina Mueller. Her experience at brands such as L’Oreal and Schwarzkopf will be tested to the fullest in making buyers think that Opel is worth it.


New financing product for Ireland
At least in Ireland, the work will be made somewhat easier by the addition of a new Opel Choices personal contract plan (PCP) financing product, backed by Bank of Ireland. With customers able to access credit from the likes of Volkswagen and Renault’s own banks, that’s a crucial leg-up.

“The challenge that we have is that the Volkswagen and Renault banks, being incumbent banks, were able to bring products to market earlier,” said Sheeran. “So Opel Finance will be a little later to the party . . . but we now have the full suite of tools to compete with those who had the advantage a little earlier than us, because the Irish banking sector had to go through its contraction and consolidation.”

Against the assembled might of Volkswagen Group and the expansive Korean brands, Opel has its work cut out, both here and in Europe. Its paymasters at GM cannot be expected to much longer sustain Opel’s loss-making, even at the projected cost of $13 billion to shut it down. The fact that Opel will this year shutter its transmission plant at Bochum in Germany – the first German car factory to close since 1945 – indicates that at last it is grasping the nettles of change – but is it too late?