REPORT: Opel to cut prices 40% in order to save jobs?
Sometimes deals get made, and then the dealmakers have to employ some pretty creative tactics to get the terms to work. Magna's deal for Opel included taking €1.5 billion in short term loans from the German government, the string attached being that Magna had to guarantee German jobs.
Saving jobs means selling more cars to maintain production levels, and outside observers are suggesting that Opel would need to cut prices by 40% to move enough metal to keep people on the lines. Of course, a 40% drop in prices makes profit almost impossible, and some are saying Magna doesn't care about profits right now. One analyst said Magna and GM might want to increase costs, since Magna would sell more parts and GM would get more royalties. That, however, seem like the wilder side of speculation.
Magna has said the 40% discount hypothesis is absurd. Magna's mandate was to save German jobs -- that doesn't mean other Opel or Vauxhall factories in other countries can't be shuttered. Such a discount would also bring competing automakers into the debate; they would need to fight battles both on the dealer lot and with their government lobbyists, who would question Opel's right to sell cheap cars with government assistance.
[Source: Bloomberg]
Reader Comments (Page 1 of 1)
Quirky 2:22PM (6/19/2009)
With one of the conditions of sale being that Opel cars are not allowed to be sold in the USA should the EU impose a ban of US built GM cars in Europe. After all the door does swing in both directions.
You could even put a tariff on Government Motors vehicles being sold in the EU to help pay for the loans for GM and other companies that have come about from GM's collapse.
So that would include Cadillac, Chevrolet, Buick, and GMC.
President Obama needs to considering the full terms of the condition to stop potential trade wars happening.
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Emil 10:09AM (6/19/2009)
A 1.5 Euro loan? Hell, I could have lent them that!
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Brian 10:54AM (6/19/2009)
I'm american, and I think I have 1.5 euros lying around at home in a drawer somewhere.
The power of the dollar really has dropped. What are we at, $1B = .5 euros??
Sounds like time to cancel my Spain trip this summer.
Bloke 10:13AM (6/19/2009)
Great if you want to buy a new Vauxhall, but all it will do is suppress already dire used residuals. You can bank on getting back 30% of an Insignia's list price for example if you sell it after three years.
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TigerMil 10:15AM (6/19/2009)
I've said before and I say it again...MBA 101...One needs to learn the difference between maximizing profits and minimizing losses! IF you cannot liquidate or choose not to, and you cannot make profits, you MUST minimize your losses! GM and/or Opel may be forced to engage in this...and a 40% cut in prices may just be what it takes.
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Avinash machado 10:16AM (6/19/2009)
Maybe Opel will get sold to the Chinese after all if these delays in agreement between GM and Magna continue.
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Judy Zik 12:32PM (6/19/2009)
Utter non sense. Opel isn't about to drop their prices by 40%. Everyone's sales are down with the current economic climate by close to half. When the economy rebounds things will sort themselves out. They will add sales to Canada and Russia pretty quickly and likely work on developing other markets in Asia. I like Opel's chances more than some other automakers right now.
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