Talk about bad associations! Bloomberg reports that
General Motors Co.’s European Opel unit is introducing models with advanced options typically sold on luxury cars, seeking to revive a business that’s lost $14.5 billion since 1999.
The GM unit is working with AlixPartners LLP on how to tweak options packages or production plans to spur higher prices, said two people familiar with the matter. They are also studying ways to reduce engineering and manufacturing costs, said the people, who asked not to be identified disclosing private plans. Some new features include headlights tuned to high-speed driving on the Autobahn.
Which leads to one damning conclusion:
“They can’t price their cars like Audi or BMW,” said Thomas Stallkamp, principal of Collaborative Management LLC, a Naples, Florida-based consulting firm. Stallkamp, a former Chrysler Corp. president, was a partner at private-equity firm Ripplewood Holdings Inc. when it tried to buy Opel in 2009. “They’re like the Chrysler of Europe.”
Keep in mind, this isn’t just any old analyst… this is a guy who tried to buy Opel back when it was officially for sale. And though pricing issues in the face of rising costs are one Chrysler-like problem facing Opel, there’s another issue that may even be more troubling…
Like Chrysler, Opel’s got another huge problem: dependence on a single market. Just as Chrysler is stuck fighting for share of the shaky US market, Opel is, for all intents, stuck in a European market that seems to be going nowhere. Though its market share has been going up, it’s still a discount brand relative to its main competitor, VW… and the European market lost sales last year as it started to shake off a cash-for-clunker hangover. Meanwhile, the German market, which is recovering the strongest, has not been receptive to Opel recently, and analysts warn that the brand will have to look to less-attractive European markets like Italy and Spain for growth.
So where else is there for Opel to go? Good question. Though the brand is technically being sold in China, there’s no sign of its volume in GM’s sales reporting, meaning the numbers must be miniscule. Meanwhile, Opel must not only face in-house competition from Chevrolet, but possibly against its own overseas-built cars bearing Buick badges down the road. In short, GM is not only not expanding Opel to the new markets it needs to leverage its premium-ness that isn’t being appreciated in the European market, but it’s actively encroaching on the brand as well. And don’t forget the huge restructuring costs (GM is estimated to spend $11b on Opel through 2014) hanging over the European division as well.
And you thought Lancia was “the Chrysler of Europe”!