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GM giving up on Opel - for good?

2012-07-16 14:10

FRANKFURT, Germany - Just hours after GM abruptly fired Karl-Friedrich Stracke as chief executive of Opel last week industry observers were already beginning to ask whether it was time to start writing the troubled European unit's epitaph.


Since GM emerged from bankruptcy three years earlier Opel has racked up the equivalent of R28.95-billion in underlying losses thanks to an ever-shrinking European auto market, a bloated fixed-cost base and an image that GM has helped to bring low.

OPINION: Daniel Howes, Detroit News

In the previous four weeks, however, management and labour had made promising signs of progress, approving a mid-term business plan and agreeing to end production at a German factory in 2017 as the basis for restructuring negotiations. Morgan Stanley analysts even began shifting their attention from GM's Opel problems to those of Ford in Europe. 


'FIX IT, SELL IT, OR CLOSE IT'


All for nothing as everything appears to be up in the air again, including killing off the brand, even if company sources argue one person's departure changes little. GM and Opel have not commented publicly on the reasons for Stracke's removal, other than to say he would "take on special assignments" at GM.


One industry observer believed GM CEO Dan Akerson was following the advice of ex-GE boss and management guru Jack Welch, who once said that if a company didn't measure up, the only options were to "fix it, sell it, or close it".


Ferdinand Dudenhoeffer, a professor at the Centre Automotive Research (CAR) in Duisburg, Germany, said: "This will be the last such attempt under Akerson and since GM couldn't sell Opel last time, they will just wind it down if they can't fix it."


While Stracke's sacking may please investors on Wall Street demanding quick results, observers in Germany have criticised the timing as myopic and characteristic of GM executives who lack commitment and strategic vision.


Andreas Halin, managing partner of GlobalMind Executive Search Consultants in Frankfurt and an expert on corporate management, said: "Opel's problems won't be solved by managing it on the basis of quarterly results. Either the owner adopts a long term strategy and sticks to that plan or it looks pretty damn bleak for the brand in the future." 


HISTORY OF POOR DECISIONS


GM has a history of abrupt U-turns that have damaged its credibility. In September 2009, GM's board agreed to hand control of Opel over to a consortium led by automotive parts maker Magna in a deal brokered by Chancellor Angela Merkel, only to change its mind weeks later.


Then GM spent months pressing for financial aid from four German states where its manufacturing plants are located before withdrawing the application.


And now GM vice chairman and Opel supervisory board chief Stephen Girsky has removed Stracke less than a month after the business plan was approved and a key logistics deal was struck with France's Peugeot.


"The worst is that GM frequently changes course," Dudenhoeffer said. "Until yesterday the strategy was to guarantee jobs through 2016, today it is making cuts and closing plants as quickly as possible.


"Why else did they get rid of Stracke? GM was not satisfied with the business plan and the second quarter results were blood red, so Girsky shot from the hip to save his own skin."


Sources at the company say nothing has changed apart from Stracke's departure, but no reassurances were offered in the statement on Thursday that Girsky would honour past agreements and officials were slow to confirm he would.


CAN OPEL SURVIVE?


The choices for Opel are now only becoming less and less appealing as GM compounds the problems of a slumping European car market and overcapacity with a leadership debate.


Wolfgang Meinig, head of the FAW automotive research department at the University of Bamberg, says radical cuts are needed now more than ever to nurse the company back to health.


"The most senseless thing a loss-making company can do is maintain existing overcapacity and guarantee jobs under pressure from unions and politicians - it's deadly, like a millstone around the neck of someone drowning. There is only one way to guarantee jobs and that's by earning a profit," he said.


Experts wonder whether Opel can survive such strong medicine after all the upheaval and strategic zig-zags, or whether the damage done to consumer confidence in the brand is irreversible.


"After all the wrong decisions taken, I really am concerned whether it will still be around in 10 years time," Meinig said.

Reuters

Comments
  • mogo.naut - 2012-07-16 15:42

    Such pity because they actually have very interesting range of Cars. Man I wish they could bring the Insignia to our shores..

      thando.gqabaza - 2012-07-18 10:50

      It is a pity because these Chevs are nothing but Daewoo's ( we don't get the REAL Camaro and Corvette etc ). Also I see the sales of these Chevs are quite high every month who is buying this Daewoo crap ?

  • jacques.shepperson - 2012-07-16 16:24

    Opel has good cars, GM can only close it because if they sell it the technology will get into other people hands and they cant fix it because if they could they would have done it already.

      adam.wood.146 - 2012-07-17 10:00

      ...what?

  • amelio.meyer - 2012-07-17 08:51

    I wish someone else would buy Opel from GM. They have really screwed up this brand by insisting to pump Chevrolet crap down our throats! Opel has good products and if GM allowed them a better marketing strategy as well as the ability to sell Opels in all other GM markets around the world (US, UK, South America, etc) ...they would fair so much better.

  • Cyrus - 2012-07-17 10:27

    GM really killed the brand

  • morne.willemse.77 - 2012-07-17 12:55

    Let South Africans start to boycott GM crap. Who wants to drive a plastic Chev anyways?

      mogo.naut - 2012-07-17 14:22

      Bring the Corvette or Camaro over here, price it similar to a 3 series, A4, C class THEN I'LL Sure as hell get one.. Till then no thanks.

  • franco.henegan - 2012-07-18 09:36

    the problem is Gm is killing the brand by forcing the chevbrad as top, but we all know OPEL is the best of the two, OPEL have such a wide veriaty of cars that will never see our shores, as F*CKIng GM don't want to lose sales on there ''CHEV'' brand. if opel can break away from GM they will become such an strong brand and then bringing all the models to all the shores, will bring them so much profit. OPEL insignia vxr, gorgeous car and 5th fastest saloon car in the world. opel moca rival for the toyota rav4,bmw x3... the new astra gtc and opc, what a car. the new mariva... and and and..... OPEL GO ON YOUR OWN AND YOUR WILL BE SUPERIOR

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