By on September 7, 2012

Opel must feel like someone who’s on his deathbed, surrounded by relatives who muse how much the organs will fetch. After we ran our piece on Detroit rumors about Opel and PSA, everybody started to weigh in on the issue. The recommendation by a Wall Street analyst that GM should “dump Opel” made headlines around the world. The Economist mused aloud what an “Opel-less future” would be like.

Even here in Chengdu, China, Opel was given up for dead.

“Will GM walk away from Opel?” asked one of the slides of Pulitzer Prize winning Paul Ingrassia, Deputy Editor-in-Chief of Reuters, as he gave his presentation at the Global Automotive Forum. Said Ingrassia:

“You almost have to wonder: will GM find a way to sort of walk away from Opel? I don’t have any inside information, but clearly Opel is a major drag on General Motors right now. General Motors’ market share is slipping a bit in the United States, and of course that has to be a concern for General Motors when it faces the difficulties at Opel.”

Chinese companies were interested in Opel when it was for sale in 2009, and last year, Beijng’s BAIC was still rumored to be hot for Opel’s corpse. A Opel would be worth much more to a Chinese company than to anyone elsewhere. With a stable of certified cars, and racks of intellectual property, Opel could be the key to developed international markets that currently pretty much remain locked to Chinese carmakers. Several times today, Geely was praised for having done a good job with Volvo so far, and, said Ingrassia, “I would expect to see more Chinese acquisitions of automotive properties in Europe and North America, especially of distressed companies.”

Walking away from Opel could provide the badly needed lift for the GM stock. Morgan Stanly calculated that cutting off Opel could add nearly $1.00 a share to GM’s earnings and could drive the GM stock up by 50 percent. The idea that Opel could be taken out and shot lifted GM’s shares by 3.4 percent to $22.49 on Thursday.

Meanwhile in Germany, new Opel CFO Michael Lohscheller put on a brave face and told Reuters that “GM signaled its clear support of Opel to me and has a great understanding for the situation in Europe.”  That lukewarm statement is not enough to stop the premature eulogies. Says the Economist:

“Selling Opel would be painful but, as Morgan Stanley notes, Daimler did right when it accepted the pain involved in cutting itself loose from Chrysler (which is now doing well and keeping its new owner, Fiat, afloat); and likewise BMW when it rid itself of Rover. In retrospect both firms benefited from cutting their losses. It is hard to avoid the conclusion that GM would too.” 

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49 Comments on “Everybody Is Talking About Life After Opel...”


  • avatar
    tced2

    But who’s going to design many of the platforms if Opel is gone?
    I think “Detroit” does Corvette, Cadillac and pickup/SUV platforms and the rest is either Opel or (the former) Daewoo.

  • avatar
    tatracitroensaab

    Perhaps they can sell off Opel and then buy some German engineering know-how. Dumping Opel does not mean exiting Europe – it means starting over again.

    I seriously have no idea why the unions in Germany dont realize that they are killing off one of the last companies willing to pay them anywhere near the outrageous wages/benefits they desire.

  • avatar
    aristurtle

    Yeah, sell off a brand (and some of the best corporate R&D facilities and lots of important IP) to an up-and-coming Chinese competitor for a short-term stock price boost. Brilliant idea there, folks.

    GM needs to take Zuckerberg’s cue and ignore any advice coming from Wall Street analysts. It’s the 21st century, and retail shareholders do not have the long-term future of the company as a goal, or even a real incentive.

    • 0 avatar
      dejal1

      The fact remains that Opel lost $16,000,000,000 since 99. Who cares about the stock boost. How much of drag has that been on the stock price since 99? Isn’t 13 years of loses a long term view?

      At this point, they could give the plant away and would get a stock boost.

      • 0 avatar
        aristurtle

        That’s not the point. A quick stock boost is only useful to people who want to dump the stock after it boosts. If the company wants to succeed in Europe long-term, it needs a European presence. I happen to think that maintaining the Opel brand would probably work better than shuttering it like Pontiac and trying to sell Chevrolets, but even shuttering it is better than selling it off to a competitor for the European market. How is giving resources to a competitor supposed to help the company compete? If anything, GM should be willing to take a short-term loss in order to try and smother BAIC in the crib. BAIC can try and sell their made-in-China crapwagons under their own brand, not one that’s been in Germany since the 19th century.

        Wall Street “analysts” are only good at short-term planning. They aren’t looking past “bump the stock price this quarter so I can sell it and put the money in something that’s growing faster”. This is why Lehman Brothers lasted a century and a half under private ownership, but after it went public it was in bankruptcy liquidation after less than 15 years.

      • 0 avatar
        CJinSD

        People need to realize that European market share is now synonymous with European market exposure. Planning on corporate existence post Europe is a very good idea.

      • 0 avatar
        aristurtle

        “Post-Europe”? The continent is still going to exist. The people there, after the recession ends, are going to want to buy cars, and somebody is going to sell them cars. Their current crisis is temporary. BAIC knows this. (And, I mean, what are you expecting, anyway? A Mad-Max-style hellscape? World War 3? It’s a currency crisis; let’s not make more of this than there is.)

        Selling Opel to BAIC is permanent. If BAIC is successful, they aren’t selling it back, and if BAIC ruins the brand, GM won’t want it back. It’s short-term vs. long-term thinking.

      • 0 avatar
        CJinSD

        When the currency goes, economic output will fall to post-WWII levels and there will be no Marshall Plan to bail them out as we’re on a suicidal spending bender of our own. At that point, food will be more important than cars for longer than any current investors will be alive.

      • 0 avatar
        aristurtle

        So, Mad Max style hellscape. Gotcha.

        I’m betting my money in another direction, myself. But hey, I guess we’ll both have to wait and see.

        I am curious as to how economic output will drop to post-WWII levels without a WWII-esque widespread demolition project, though.

      • 0 avatar
        CJinSD

        Even an optimist should realize that these were the salad days of the EU. Idealism and optimism born of ignorance are dying. Every day is better than the next. Opel lost 16 billion dollars while Europe was a fantasy land of Christmas-Every-Day! idiocy. That time is over and things will only get progressively worse provided they don’t implode. Opel is supposed to make money in this environment while bearing heavy legacy costs, poor brand equity, and GM institutional rot? Right.

      • 0 avatar
        Pch101

        Opel could be profitable if the cars could be sold at higher prices, more in line with the sort of prices that VW can command.

        Opel’s tarnished financial performance is an indication of the old GM’s mismanagement of the business, not the absence of a viable market. To walk away from Opel would be foolish, as there is a lot of potential for profitability there for the right operator.

        Punting on Opel is akin to writing a check to VAG, because they’d take most of the business. And that, in turn, would fund VAG’s efforts to beat GM in other markets outside of Europe, which would make an abandonment of Opel even more costly.

      • 0 avatar
        28-Cars-Later

        “I am curious as to how economic output will drop to post-WWII levels without a WWII-esque widespread demolition project, though.”

        You hit the nail on the head ArisTurtle, we are due for one and one may be in order.

      • 0 avatar
        juicy sushi

        I would not be so quick to write off the EU. More to the point, I would not be so quick as to doubt the commitment to the EU among the German and other European political and economic elites. As Drahgi reveiled yesterday, there are resources available, and it would appear, growing political will to use them. It will be a hard slog, but I think the EU and Euro are going to survive. The political changes will be made, and are even convenient, as it allows you to make all the reforms you want, and then blame them on Brussels.

        The EU is an economic and currency union. It is not yet a political union, however that has been the explicit goal since the ECSC and Churchill’s “United States of Europe” speech.

        The only question to ask about Opel is whether or not it is critical to GM’s future success in Europe. If they can’t profitably sell cars there without Opel, then it stays. If there is an alternative, then it goes. It’s as simple as that.

      • 0 avatar
        PintoFan

        It’s always funny to listen to hysterical Americans try to predict the future of Europe based on blog snippets and infinite CNN tape loops of Greek disorderlies.

      • 0 avatar
        CRConrad

        Wall Street, The Economist, and all you share-price-blinded commentators here need to think about this: Is GM in the car business, or in the GM stock business?

        Amazingly (to quite a lot of the above-mentioned, apparently), as it turns out, GM is in the car business! The stock price is an effect thereof; a secondary phenomenon, not the root cause.

        Wall Street is in the stock business; the real economy is in the business of doing *actual* business. Real business is the dog; Wall Steet is the tail.

        What’s wrong with the world today is that the tail is wagging the dog.

  • avatar
    CJinSD

    I read on another site that Opel is blocking Vauxhall from displaying their new Cascada convertible at the Paris Auto Show because they want the focus to be on Opel’s new Adam city car. That’s the sort of management that once distinguished British Leyland. The Adam is repugnant by the way, although I haven’t gotten past the slow-loading landing page of the website: http://www.opel.com/microsite/adam/#/home It made me want to retch. The scary thing is that this was probably put together by a completely distinct set of creeps within GM from the ones that coughed up the Volt dance. Speaking of the Volt, GM must be making a fortune off the no money down, $159 a month lease deal that Forbes has a story about. What’s the residual on a car that needed a huge tax break to sell in the first place?

    • 0 avatar
      BrianL

      On the $159 lease story, which really doesn’t offer details, the “no money down” apparently includes $3000 in GM credit card rewards and a trade in on their last car. I would be interested in seeing the actual numbers on the lease agreement to see how they bought the lease down that far, but it wasn’t with “no money down.”

      • 0 avatar
        CJinSD

        The BMW was probably a lease too, so no trade in there. If they traded in a car worth $20K to lease the Volt then this is a non-story. One would hope that someone at Forbes understands financing a car well enough to realize that.

      • 0 avatar
        sunridge place

        CJ…you have a little too much faith in Forbes journalistic integrity.

        Read the damn article.

        http://www.forbes.com/sites/joannmuller/2012/09/05/at-this-price-we-should-all-own-chevy-volts/

        Blogger mentions they were ‘BMW Owners’ and writes this later in the article:

        ‘It probably also helped that they have a top-tier credit score and were trading in a BMW’

        ….plus 3k in GM Card Earnings that aren’t ‘free.’

        The writer basically discovered a $1000 dealer discount on a Volt…a shocking and unheard of thing.

      • 0 avatar
        BrianL

        It doesn’t say what the BMW, it may or may not have been a lease. But, what I will tell you that his no money down included 3k in rewards on a GM credit card. That is money down.

        There was also a writer for Forbes who says GM is going bankrupt because of the backseat of the Malibu. How much stock should we hold Forbes to when it comes to finances?

        Bottom line, the details are missing, the conclusions of no money down are wrong… do we really have anything to go off of here?

    • 0 avatar
      PintoFan

      Everything even remotely connected to American prosperity makes you want to retch, so that’s not really a valid complaint.

      Even if the rumors are true, displaying a mass-market city car instead of a niche near-luxury convertible at a major European auto show is a no-brainer.

  • avatar
    BrianL

    Bertel,
    How is Opel structured? I am guessing that the intellectual property that people think Opel owns, they don’t. I am doubtful that Opel owns its own R&D facilities. Correct me if I am wrong in this, but I am pretty sure Opel pays royalties to a part of GM in Delaware for use of the platforms.

    My guess, if GM sells Opel, the buyer gets rights to the brand and factories. GM may allow them to use the tech for sometime as a lease, but the agreement will have an expiration date and people who currently develop for Opel aren’t going to be part of the deal. Remember how GM sold Saab, with basically just the brand going on the block? I am guessing that Opel will be close to the same thing if sold.

    • 0 avatar
      CJinSD

      Why didn’t any of this IP concern apply to Ford selling Volvo, Jaguar, Aston-Martin, and Land Rover? Ford was dependent on Volvo for large car platforms. Jaguar had their best engines. Land Rover was a carrier of BMW IP. Still, all ended up in the hands of automakers with less in-house developed technology. Ford doesn’t make worse cars than GM does. Why weren’t they threatened by having their best stuff scattered to the developing wind?

    • 0 avatar
      CJinSD

      The point was that GM had about the same ownership period with Saab as Ford did with Jaguar. They still sold Jaguar complete with tons of IP and new platforms ready for production. Jaguars weren’t just a little more desirable to consumers than Saabs at the time either. Is GM really concerned that someone else is going to take their lovers of overweight, dynamically indifferent cars with poor packaging and engines that combine mediocre fuel efficiency with obsolete levels of NVH? I dare say their remaining customers are brand loyal, otherwise they’d buy better cars. Ford sold their subsidiaries for money and reduced liabilities. GM still has their liabilities and OPM. Maybe GM’s real concern is that a new owner of Saab or Opel would get to pull back the curtain and see the Wizard in all his inadequacy.

      • 0 avatar
        BrianL

        I get that you don’t like GM cars, but don’t let it cloud your judgement on a business decision (for one, the increased weight greatly improves the NVH values, but also has problems with fuel economy, see I can be objective).

        Opel help develop delta and epsilon platforms, which are the two global platforms GM has. So, pretty much whoever competes in the market with these platforms is going to compete with GM. Is that something GM wants?

        But, let me turn this around… if GM’s IP is so bad, who is going to buy it? They had a buyer last time.

      • 0 avatar
        CJinSD

        Chinese companies that want market access or have no idea how to make cars are the buyers.

  • avatar
    analoca

    How does Morgan come up with advising that GM dump Opel when:
    1) Opel is GM’s only foothold in Europe,
    2) Losing Opel would result in product loss for Buick and by extension China,
    3) Losing what probably amounts to 15-20% of GM’s worldwide volume in sales.

    THe European car market might be contracting or highly competitive, but how does Morgan suggest GM compete with no-name brands in Europe? Especially without a foothold? Especially with high degrees of nationalism? Especially with no dealer network?
    Does Morgan suggest GM just abandon the entire market all together?

    To me, on the surface, dumping Opel would look like a short-term strategic gain for GM, but ultimately, I think it would lead to a far stronger VW and other European competitors, especially if Opel is sold to VW or Fiat or PSA or BMW or Daimler. In other words, losing Opel would be a long-term disaster for GM.

    • 0 avatar
      28-Cars-Later

      I agree with you on points 1 and 3, but I have to disagree on point 2.

      What is Buick at this point?

      From what I can tell in China Buicks are Daewoo platforms and Holden imports (Park Ave); (and Bertel please confirm or deny).

      In the United States, they are a mismash of Opel/Daewoo… so in both countries they don’t really seem to be their own brand at this point. The new SOP for the brand seems to be copy designs from somewhere else and sell them as Buicks (upscale Chevys as it were), so if Opel goes away, just copy from Daewoo/Holden or *gasp* come up with a new one in Detroit.

      Now if RenCen gave a ****, they would start doing unique things with Buick in both countries instead of turning the Tri Shield into a Xerox machine for overseas car designs. Cadillac gets street cred from many for doing all of the different (but awful IMO) things they did with the brand… so if that’s moving iron, why not the same with Buick? (I say awful because making Cadillac into BMW is sacrilege, I would have done those radical things with Buick and tried to rebuild Cadillac as a low production/high margin “America’s Rolls Royce” again)

      Personally I’m going to file the overall idea under not-gonna-happen.com, I think GM is much more a wounded animal then we are led to believe. Its obvious from 2008 to now they didn’t invest much in R&D, hence the quick and easy Opel copies for Buick, one newer car model (until recently) for Cadillac, and continuation of now aged SUV/Truck and engine platforms in Chevrolet/GMC.

      • 0 avatar
        BrianL

        Opel and Daewoo jointly worked on the Delta platform, although, around TTAC, all you hear is that the Cruze is a Daewoo. Opel also worked on it. The Buick products in China that use the Delta platform have more in common with the Astra than they do the Cruze.

    • 0 avatar
      el scotto

      Oi Mate, ever drive a Vauxhall?

  • avatar
    analoca

    At the end, all this smells to some biased republican party influenced news through Morgan Stanley servant for their benefit in the Presidential Campaign…

  • avatar
    JohnTheDriver

    TTAC will fail before Opel does.

  • avatar
    rnc

    Opel is dead, as I said the other day think about the 1950’s US market, Opel is the Hudson/Packard, no national government to save it (and to tell the truth, unless the french and italian governments are going to buy alot of new cars for thier national fleets, looking at EU rules, there’s only so much they can do for those), Geely buying volvo is a great deal different than anyone buying opel (or GM letting anyone buying opel), Volvo is small, has a US market and hadn’t developed one in China yet (opel is big, has both markets but thier called buick), Ford wasn’t selling thier newest IP , etc. they were selling previous generation IP (in good condition, same as Jag/LR, Ford left both in great shape and could be sold vs. GM and Saab), GM isn’t going to sale Opel to a Gov. owned entity that will have to cash to recapitalize them while giving away it’s latest generation IP for its two largest markets. Opel is seperately incorporated, that’s why GM could go into bankruptcy w/o the oppressive (in comparison to US) bk rules taking place in Europe, GM can let it go, they can buy (intercompany transaction) the engineering portion first and will let it die before selling it. Ford will take a majority of the marketshare, as they are one in England and are thought of as much of a german company as Opel (actually more so, as GM has screwed up Opel, were as Ford has improved), now in old GM think, the thought of losing marketshare to Ford would have been worth billions of losses, this is really a litmus of has GM changed, VW thrived with little US marketshare, GM can thrive with little European as well, just a matter to being willing to and rebuilding (old GM or new GM?)

  • avatar
    fredtal

    The real question is does GM have the ability to revitalize Opel? It is a long term project and I don’t believe current management has the will (or skill) to do it.

  • avatar
    Spike_in_Brisbane

    Opel has just launched here in Australia, only in the last few weeks. I spoke with a Brisbane sales manager who said they have no local tie up with GM and that their warranty work and servicing is done by the local Audi dealer.
    How does this play internationally?
    (The Insignia Sports Tourer looks great – diesel wagon!!)

  • avatar
    PintoFan

    I remain personally unconvinced on the entire Opel business, as I can see valid reasons both for keeping the company and dumping it. But those saying Europe will stop being a valid market for new cars are laughable. I understand that certain people in the commentariat have quite a large ego stake in seeing the world implode, but it gets more and more comical every day to see what lengths they’re willing to carry their millenarism. The EU is not going anywhere. Their may be changes, some painful, but European civilization will not crumble into dust under the weight of a billion hysterical internet comments.


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