Sale Denials Aside, GM's Future Looks Brighter With One Less European Partner



If GM can find a way to kick its German unit to the curb, it will do so in a heartbeat.

Even though the recent rumors of Opel being sold by General Motors to Fiat were roundly denied, there is still a lot of merit in the idea of an Opel-less GM. And you can be sure that if the company can find a way to kick its German unit to the curb, it will do so in a heartbeat. Here's five reasons why GM should be looking for a way out:

First: Opel is a money loser. The European economy is not only in shambles, but is one of the most competitive car markets on the planet. There is excess capacity, heavy discounting and no one wants to be the first to blink by shutting down factories thereby losing market share and more importantly increasing unemployment in their home country. In this environment, Opel is sure to remain a money loser for the foreseeable future and will soak up profits generated by GM North America just to stay afloat.


Matt DeLorenzo is the former editor-in-chief of Road & Track and has covered the auto industry for 35 years, including stints at Automotive News and AutoWeek. He has authored books including VW's New Beetle, Chrysler's Modern Concept Cars, and Corvette Dynasty.




GM's hands are full battling its "Government Motors" image in the US.

Second: GM can't afford to get involved in German politics. The company has its hands full battling its "Government Motors" image in the U.S. and can't risk being involved in internal German politics if it moves to close factories there to stop the financial bleeding. Also, the fact that the U.S. government has seats on the GM board is also likely to figure in any decision regarding its German unit because of the impact any layoffs there will have on international relations between America and one of its largest European allies. If GM can unload Opel in a way that is politically acceptable to the German government, it rids itself of some messy decision-making that has to come soon.

Third: Unloading Opel will boost GM's stock price. If GM is able to find a new owner for Opel, it will strengthen its bottom line by getting rid of a source of negative cash flow and debt from its books. The other benefit of a higher stock price is that it would make it more attractive for the U.S. Treasury to sell its stake in GM (something that management desperately wants) and allow it to get the "Government Motors" monkey off its back once and for all.

Fourth: By selling Opel, GM will clarify its joint venture relationship with France's PSA. While there may be some platform synergies among GM, Opel and the PSA group (which includes Peugeot and Citroen), this relationship does little to reduce the capacity of the various partners, which is a critical step towards profitability for all. With Opel out of the picture, the capacity question becomes less of an issue between GM and PSA. It will also allow GM to move forward with just one European partner instead of two, making life much simpler.

With Opel out of the picture, GM can strengthen the image of Chevrolet and Cadillac as global forces.

Fifth: With no Opel in the picture, GM has the opportunity to strengthen the image of both Chevrolet and Cadillac as global forces. GM has been working hard to build sales of both Chevy and Cadillac in Europe, establishing both as true global brands. Cadillac is clearly in the luxury segment and has little product overlap with Opel. Chevy, on the other hand, competes directly with Opel on the Continent and with the Vauxhall sub-brand in the UK with its Cruze. The fact that GM spent $600 million in a marketing tie-up with the Manchester United soccer team underscores the magnitude of the company's commitment to making Chevy a major player across the pond. Getting rid of Opel opens up the playing field to a broader range of Chevrolet's products in Europe and also allows for a product strategy that better leverages the PSA joint venture to market the fruits of that relationship under the Chevy banner.

So, while GM continues to profess its confidence in Opel as an integral part of the company's future in Europe, it will become increasingly difficult to stay the current course unless there is some major and painful restructuring. A smaller, more focused Opel may survive, but if it's not deemed politically acceptable to close factories in Germany or new ways are found to reduce costs or the cut-throat competition in Europe continues unabated, GM will most likely continue to look for some sort of exit strategy.


Matt DeLorenzo is the former editor-in-chief of Road & Track and has covered the auto industry for 35 years, including stints at Automotive News and AutoWeek. He has authored books including VW's New Beetle, Chrysler's Modern Concept Cars, and Corvette Dynasty.





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    • 1 Second Ago
  • 77 Comments
      mikeybyte1
      • 2 Years Ago
      The only point you didn't address is Buick. GM is trying to revive that brand in the US. It is big in China. And many of the products are based on Opel. So if GM dumps Opel it will need an entire new strategy for Buick.
        NixiN
        • 2 Years Ago
        @mikeybyte1
        My point exactly.... the editor forgot to address this.
        timber
        • 2 Years Ago
        @mikeybyte1
        Several Chevrolets are also Opel based (the Cruze or the Sonic/Aveo for example...)
      kopter28
      • 2 Years Ago
      Anything decent that ever came out of GM was based on a platform designed by Opel or a re-badged Opel. This article is a joke right?
      Anonymous
      • 2 Years Ago
      This article makes the same mistake that other commentators on the subject have made time and time again. Opel/Vauxhall are not in competition with Chevrolet. Chevrolet is a 'budget' brand in competition with Skoda, Hyundai, Kia etc, whereas Opel/Vauxhall are is competition with the likes of Ford, Volkswagen, Toyota, etc. Equally, commentators on this subject have an awful tendency to gloss over the fact that virtually all of GM's most sophisticated platforms are developed in Europe. The irony of saying that Chevrolet should take over in Europe when Chevrolet's A, B, and C segment cars' platforms were developed by Opel, is quite obvious.
      aatbloke1967
      • 2 Years Ago
      The article's first and fourth points are utterly contradictory. If you think you're better off having no investment in a European company, you wouldn't get into bed with another one which has a) a poorer reputation among Europeans, b) being even worse hit by the European economy and being deactivated from the CAC40 as a direct consequence and c) one which doesn't hold substantial market share outside of France. The fifth point omits taking into account one major fact - that the UK and Germany are Europe's largest economies and both sit in the worldwide top five. Germans and the British are loyal to their marques - on several occasions the idea of canning Vauxhall and rebranding UK-spec products as Opels has been met with scathing criticism. Chevrolet is known throughout Europe as a budget brand, and is marketed as such. People will not switch from Vauxhall/Opel and jump into Chevrolets en masse, and if there's a loss of European manufacturing and design base in Europe, then the political fallout will be so great that GM would be better off canning Chevrolet as well. Which brings me to the second point - GM's 86 year presence of manufacturing in Europe instantly makes it an indigenous political hot potato - it's already embroiled. As for the third point (stock price) - investors will naturally be worried about a major contraction in GM, since the offloading of Opel would not secure, or guarantee, higher long-term profits or worldwide sales. It's likely stock prices would in fact fall, coupled with the fact that the outlook of one of the main bastions of igniting the US economy - housing - remains bleak and is showing no long-terms improvement signs. There are many arguments for GM scrapping its entire global presence and concentrating its efforts on its North American and Korean manufacturing and development bases. But then you have a company little different in concept and stature to Hyundai. Europe's problems - created entirely by bailing out American and European banks in 2008 - will continue for at least the next five years, after which it's likely to recover. But the US isn't out of the woods yet either, and there are a good number of signs it too will be heading for a double-dip recession.
      Lachmund
      • 2 Years Ago
      yeah, get rid of the only brand... don't be thankful that they created some of the best platforms and design of whole GM.
        Lachmund
        • 2 Years Ago
        @Lachmund
        is this editor a douche or just uninformed?!
          aatbloke1967
          • 2 Years Ago
          @Lachmund
          Both. It really is one of the biggest piece of tripe I've ever ready on a blog. It's hypocritical, uninformed and quite naive.
      Avinash Machado
      • 2 Years Ago
      Opel is a big engineering and R & D center for GM. Several cars from various GM brands use Opel engineering and technology. Selling Opel would end up being suicidal for GM.
      GTP_Ingram
      • 2 Years Ago
      *Manchester United, not City. BIG difference... Now I've cleared that up, if GM were to sell off Opel/Vauxhall, then they would need to try much harder with their mainstream cars. Hardly anyone knows the Cruze exsits here in the UK, and the rest of the range still carries the stigma of being re-badged Daewoos, in other words cheap, flaky, and not up to scratch compared to offerings from Renault/Ford/VW etc. Not enough effort is made to sell the Corvette or Camaro in the UK, both of which have potential to become halo models for an otherwise average range of cars.
        lasertekk
        • 2 Years Ago
        @GTP_Ingram
        If they watch the BTCC, then they know the Cruze exists, and it's winning races.
      Ryan D-C
      • 2 Years Ago
      I registered just to leave a comment on this article and say this Op-piece is so inherently flawed.. As everyone's already said, R&D at Opel is huge for GM... there also wouldn't be Buick considering they're mainly just rebadged Opel/Vauxhalls, so all that chinese money wouldn't be coming in... Chevy compete with Vauxhall in the UK? What a joke... it's seen as a budget 'cheap and ****' brand in the UK, only they're not that cheap. (interiors matter in Europe...) Chevy won't compete with European brands/development for years to come... Over all though, the author has just shown the sort of short-sightedness which always causes the US car industry to fail... and it has failed.
      timber
      • 2 Years Ago
      Despite all disadvantages and the money bleeding without Opel GM will not have anything serious to sell in Europe. Cadillac is non existent and has zero prestige in the European market and Chevrolet is know as a Daewoo rebrand with good value for money. Opel on the other hand is a reliable manufacturer of mainstream cars slightly upscale in relation to other mainstream brands (like FIAT or Renault or Citroen). Still a few more years and Chevrolet will be considered a normal brand and may replace Opel in the European market.
      J
      • 2 Years Ago
      Where would the Regal be without its Opel arm? It would still be crap. Give the GS the AWD it was meant to have. Bring over the Astra (OPC!) and some of the other cars I'm too lazy to look up.
      Jake
      • 2 Years Ago
      This very short-term thinking. The markets change year-to-year. Perhaps Opel is a money loser now and costing GM money, but Chevy doesn't have any brand equity in Europe and ditching Opel and bringing up Chevy will cost a lot too. This is what cost GM a lot before: spending dough on a brand name, destroying that brand name with junk, creating a new brand name, lather, rinse, repeat. Sometimes you have to ride out a storm and a business should be managed so that it is able ride out a storm and not have to run to Uncle Sam to save it.
      juris.bo
      • 2 Years Ago
      GM can`t dump Opel. GM doesn`t have engineering capability within US to design high quality and fit and finish products, so they resort to outsourcing all complex components abroad. Currently most GM cars are sitting atop German engineered platforms. Even your Camaro sits on a modified Opel Omega platform. All epsilons , deltas, etc. are german engineered. Actually none of US manufacturers are able to engineer their own platforms. Ford pumps Mazda components, engines etc, plus milks german Ford subsidiary, besides that Ford was quick on humping Volvo as well. Chrysler , being a typical American company ( a slogan should be= the more complex a component, the less likely we would design it in-house) , has been exploiting Mitsubishi components and Mercedes comopnents as well. Besides GM was eager to suck dry Korean engineering from Daewoo as well, while Toyota was regularly showing middle finger on transfering their comonents to all plethora of GM nose-jobs. Look at Detroit, where are all the engineering facilites and jobs? When was the last time GM within United States designed a minivan on their own? Advncdb
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