By on April 3, 2011

From the sounds of a story at the Freep, both GM and Ford appear to get ready for bigger losses from Europe. Led by fanfares inflated by their hometown paper, Ford and GM seem to embark on a PR campaign to soften the blow at home:

“Europe was GM’s only unprofitable global region in 2010, extending the company’s streak of years in the red there to 11, with a $1.8-billion European operating loss. GM is hoping to break even in Europe this year before restructuring charges.”

(It’s the restructuring charges that will be the humdinger. Even if kept as non-recurring items, they will hit the bottom line in a big way.)

“Ford unexpectedly lost money in the fourth quarter in Europe, losing market share because it refused to match competitors’ incentives. It made a profit on European operations for all of 2010, albeit just $182 million of its $6.6-billion companywide profit for the year.”

And who’s to blame? The customer of course. The Freep’s informers see a gaping perception gap that is widening every day:

“Neither Ford nor Opel stands for anything desirable to most European customers, and that’s costing both automakers dearly.”

“Regardless of how good their vehicles, design and technology are — and some are very good indeed — Ford of Europe and GM’s Opel will struggle to sell cars and make money until they change perceptions.”

Of course, nobody at Ford or Opel can be faulted for that. They are getting tripped-up in that European morass. As for Opel …

“Opel was arguably GM’s strongest brand in the late ’80s and early ’90s. It was among Europe’s design leaders with rising sales and multibillion-dollar profits. Then it wandered into the wasteland. Quality fell. It was portrayed as an American interloper during a nasty corporate espionage dispute with VW. Finally, it became a plaything in German partisan politics during the credit crisis.”

Nice story, but bunk. That “nasty corporate espionage dispute with VW” was started by GM after Jose Ignacio Lopez had left GM to become purchasing chief at Volkswagen. GM rolled out the big artillery. Volkswagen was treated worse than the mafia, racketeering charges were brought against Lopez and VW under the RICO act. Only after then President Bill Clinton and then Chancellor Kohl intervened, the matter was settled. If GM would have been smart, they would have left Lopez in Wolfsburg. He was just about to ruin Volkswagen. The “Lopez Effekt” (buy cheap at any cost) had impacted Volkswagen’s quality and would haunt VW for many years after Lopez had left. However, the scandal started in 1993, when Opel was supposedly a strong brand. And in any case, Opel was out of the firing line during those battles, it was always between GM and VW. I was there when it happened.

And plaything of German partisan politics? Bunk again. All shades of the German political spectrum wanted to bring Opel home when GM was out of money. It was Ed Whitacre who blew the deal. As penance for the snub, Berlin subjected GM to an especially slow German water torture until GM threw in the towel. Without Opel, GM’s stock would be in the high 40s by now.

The drawn-out Opel wrangling indeed changed the perception of Opel in Europe and especially Germany. It also doesn’t look good that Opel is closing plants and is firing workers while the rest of Europe works overtime.

The situation at Ford is far less dire than that at Opel. All that the Freep could come up with is that “Ford is seen as bland and generic.” They quote a Christoph Stürmer of IHS Automotive who said that “Ford is a utilitarian brand that doesn’t have a halo vehicle that shapes how people view it.” If that’s true, so what?

Since when is the lack of a halo an excuse for being in trouble? Frankly, we don’t see serious trouble at Ford, unless the Freep has advance notice. Frankly, we don’t see the reason why Ford is being tarred with the Opel brush. Compared to Opel, allegedly bland and generic Ford looks downright healthy. Bland and generic is no excuse. A company comes to mind that became the world’s largest automaker while  bland & generic was its trademark. Finally, if a Jack Baruth gets excited about a Made in Germany Ford, the brand can’t be all that bland and generic.

At least one insight of the Freep is right on target:

“GM and Ford have built cars in Europe for more than 100 years. They employ tens of thousands and build more than 3 million cars a year in Europe. They can’t blame economic nationalism or chauvinism for their lousy images. They earned customers’ low opinions, much as they did in America in the ’80s and ’90s.”

The Freep is overlooking one big problem that stands in the way of Opel’s and Ford’s profitability in Europe. Both brands are targeted at Europe, and nothing but Europe. As our ongoing coverage of European car sales attest, Europe is not the place for making big profits with cars. Daimler, BMW, Volkswagen et al would be in similar if not deeper doo-doo if they wouldn’t make tons of money in Asia. Opel and Ford Europe don’t have these options. Sure, they are most welcome to design the cars for the growth markets. These cars will be sold through deals made by the home office.

However, that insight probably doesn’t fit into the PR strategy. Can’t blame a perception gap for Ford Europe and Opel being locked out of red hot markets.

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4 Comments on “Monster European Perception Gap Swallows GM And Ford...”

  • avatar

    How accurate is any of this? Ford in Europe is mostly seen as what Honda was in the US (until maybe the past couple of years when Honda bloated their lineup.)

  • avatar

    At least in the US I think the “Lopez Effekt” succeeded beyond expectations.    It has only been in the last couple of years that a car coming at me with a burned out headlight wasn’t almost always a VW.

  • avatar

    I think that the current model line-up of both Opel/Vauxhall and Ford is quite competitive. Both companies are selling quite good, too.
    The key problem is that “Both brands are targeted at Europe, and nothing but Europe.” Of course, “Europe is not the place for making big profits with cars. Daimler, BMW, Volkswagen et al would be in similar if not deeper doo-doo if they wouldn’t make tons of money in Asia.”.
    Perhaps, it would be a solution for both companies to spin-off their R&D activities into separate entities, similar to the Porsche Entwicklungszentrum in Weissach? Suddenly, the expensive R&D efforts would be out of the books at the main companies, making them shiny black. The R&D spin-offs would perhaps be free to do some engineering for others, in addition. Even if they remain in the reds for a while, this would be no problem.

  • avatar

    Small cars with small engines but high prices, one would think they could make big profit in such an environment? Where is the problem with that logic? Must be very high incentives last year.

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