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Steinhoff threat to Opel: Can the automaker survive solo in SA?

2017-12-08 11:05

Land Branquinho

Cape Town - New products galore, independent operations but no export credits - Opel’s South African conundrum. 

It has been a traumatic year of financial missives for South Africa’s economy. Beyond price increases due to Rand exchange rate weakness, we’ve seen Chevrolet fail locally and exit the South African market. Citroen too. 

Perhaps the only good thing which resulted from the Chevrolet South Africa disinvestment and closure was a return to some form of marketing and operational autonomy for Opel – the one German brand which has never traded particularly well in South Africa. 

PSA buys Opel

For established supporters of the brand, an Opel divorce from General Motors was welcome. South Africa would be different to other international markets, where Opel is now run by Peugeot, after the French auto giant purchased its erstwhile German rival earlier this year. An Opel/Peugeot joint venture was always going to be an uncomfortable entity in South African and fortunately, Williams Hunt, the dealer network synonymous with all things Opel, took custodianship. 

As the industry prepares for its festive season break, Opel appears to once again be in peril. It’s a scenario caused by the largest listed company devaluation in JSE history, the spectacular implosion of Steinhoff. With its CEO Markus Jooste having resigned in disgrace, the share has collapsed, and German authorities are investigating massive irregularities.

‘What’s that got to do with Opel in South Africa?’

Well, everything. Williams Hunt, Opel’s new local distributor, is owned by transport specialist, Unitrans, which in turn belongs to Steinhoff, a company that appears to be tethering on the brink of liquidation – or at the very least, a massive reorganising of its business and sale of assets. Which bodes ill for Opel. 

Could Opel be under threat in South Africa? The products are competitive and customer loyalty not insignificant. Those are the positives. Being a pure importer, without the benefit of export credits, awarded by locally manufacturing, creates an uncomfortable exposure to the Rand’s volatility. That’s the negative. If you are Jaguar/Land Rover retailing high margin products, that’s possibly survivable, but as a brand with most of its cars sub-R500 000? That’s where an independent Opel has the problem. 

Possible scenarios for Opel? Unitrans is a healthy business because South Africa is a large country and road logistics are crucial, hence there is cash in the bank. It’s impossible to say how much the parent company, Steinhoff, will impact its subsidiaries due to the share price collapse. But don’t rule out the opportunity of Opel having to find another new partner soon, or follow trend with international operations, and pair with Peugeot in South Africa – which could be hugely uncomfortable, as they sell remarkably comparable products. 

It’s strangely unfair, how a brand which delivers engineering integrity that German cars are renowned for, at fair prices, appears to have the worst possible business fortunes, never of its own doing, in South Africa. Hopefully Opel survives the pending demise of its South African parent company, Steinhoff. But it is using its nine lives at a heady rate. 

Can Opel survive solo?

Opel as a standalone entity. It’s what fans of the marque had always hoped for, value German engineering undiluted by American marketing. 

With GMSA dissolving and quitting South Africa, Opel was left without a parent company and possibly, a greatly reduced retail and service network of dealerships. 

Whereas Opel is now a part of PSA’s ambition to scale platforms and componentry, with the desire to achieve greater volumes and sales in markets which are hostile to the French brands, South Africa remains in a very unique position.

You’d have expected Opel to come under the stewardship of Peugeot South Africa, but no, it’s now being run by William Hunt – the network of dealers. 

Inside the new @opelsa #crosslandx in #Jozi. #SUV

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Scrutinise the Williams Hunt organogram and you realise that Opel is actually part of a very powerful South African corporate entity: Steinhoff. The massive industrial conglomerate, known for its global furniture and discount retailing businesses, also owns Unitrans, which in turn, manages Williams Hunt. Not the worst corporate structure to be involved in. 

There are issues, though. The first of which, is an absence of export credits to hedge against exchange rate fluctuations and import duties. The latter detail is crucial, as all Opel product is imported. In its position as part fo GMSA, Opel was protected by Chevrolet and Isuzu local production, which earned export credits, which could offset the import duties to land Opels in South Africa. That’s all disappeared. 

Inside the new @opelsa #crosslandx in #Jozi. #SUV

A post shared by Sergio Davids (@davids_sergio) on

Although the products are good, and Opel’s portfolio has been bolstered by Crossland X and soon to be launched Grandland, competition is severe. Crossovers and SUVs are crucial for Opel and their new Crossland offering is a relatively attractive car, with clever design details: such as sliding rear seats, which can boost luggage space by more than 100-litres. What Opel perhaps wished it still had, was the Corsa bakkie. Nissan does more than a thousand units per month with its NV200, dominating a market that Opel owned in the early to mid-2000s. 

In South Africa the brand can still trade on its German engineering perception and values, but that is soon to change as most all Opel products will become nothing but rebranded shared-platform and component Peugeots. Similar product, at similar price points, does appear to be a recipe for direct competition and market cannibalisation between Peugeot and Opel. 

What could save Opel, in the short-term, is its relative independence in the South African market – having a distribution, service and marketing network which is separate from Peugeot. The risk, of course, is that a rampantly successful Opel could annoy Peugeot, which might force an amalgamation or strategic impasse by staggering international parts availability. 

Independence is the best opportunity Opel has had in years of maturing into what customers had always hoped it could be: a value German engineered family motoring product. Whether price points can be contained, without export credit protection, is to be seen. Because VW equivalent priced Opels, well, we know how that is going to end. 

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