European Chevrolet Production May Help Ease Opel Capacity Problem

by Derek Kreindler

Published: May 14th, 2012

european chevrolet production may help ease opel capacity problem

With Opel’s fortunes in the toilet and Chevrolet vehilces gaining ground in Europe, Opel brass are looking at an obvious solution – stop building Chevrolet products in South Korea and start building them in Europe.

Opel CEO Karl-Friedrich Stracke told the New York Times that

“We are in talks with our colleagues in Detroit and Shanghai to find out whether we can build Chevrolet vehicles in Europe, to improve utilization of capacity,”

The article touches on the many familiar Opel problems – the need to close factories, excessive capacity, staggering losses (Q1 2012 saw Opel lose $300 million), but the Chevrolet solution won’t be an umbrella cure of Opel’s ills. Building Cruzes and Sonics (or Aveos, as they’re known) in Europe brings to light whether the cost advantage of building in South Korea can be maintained.

Opel is also looking to export markets, like Latin America, Australia and the Middle East for growth, but given the popularity of brands like Chevrolet and Holden in those markets, is there room for yet another sort-of premium brand when established GM nameplates and more prestigious European marques are already fighting it out in their respective spheres?

If anything, the way out of this mess may be the PSA alliance. GM puts Russelsheim to use by twinning the Citroen C5 and Opel Insignia, while PSA uses their excess capacity at the Rennes plant (just like Opel, PSA’s unions fear the closure of the factory) to build the Zafira/Picasso/Peugeot MPV. Meanwhile, mum’s the word over at PSA headquarters. That would allow Astra production to be sent to a lower-cost facility in Poland, and England, where the Astra is a key product for Vauxhall.

#Chevrolet #Citroen #GeneralMotors #Opel #OpelAstra #OpelInsignia #Peugeot #PSA

Derek Kreindler

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10 comments

Cammy Corrigan on May 14, 2012

Now, don't get me wrong (copyright "The Pretenders"), I am pleased that GM are keeping Ellesmere Port open with the added bonus of extra work and production. But something doesn't make sense. Before this episode, GM and industry insiders agreed that Vauxhall/Opel needed to cut at least TWO plants in order to get anywhere near rightsizing the operation. By my reckoning, only Bochum is a casuality. Which means there's still one excess plant knocking around. Bringing in extra volume from other areas in the GM family does nothing more than shift the excess capacity issue somewhere else. You haven't really solved anything. What also hasn't been addressed is the fact that it is the South Koreans who will lose some of their production. Have you seen these guys strike when they've got a bee in their bonnet about something?! Makes the London riots look like a peaceful demonstration. They will cause GM headaches. So again, I ask my question, where is the second plant closing going to come from? The PSA-GM alliance won't solve the capacity issue because they are just shuffling production about between themselves ("You make this, we'll make that"). If GM needed something being made, they have more than enough capacity to cover it. So why involve PSA? They have their own problems in terms of capacity. They need to kill a couple of plants, themselves and asking a company, who have an underutilisation problem of their own, for more work doesn't make sense. Personally, I'm expecting problems in GM for a while. If the South Koreans don't pipe up about losing work, then the PSA-GM alliance will be recognised as an agreement which didn't really solve the most pressing issues. Either way, it's not good for Vauxhall/Opel. And when that happens, Europe's over-capacity issue will be solved. Very painfully...

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- Hildy Johnson on May 14, 2012
  
  If Opel went down, the effect on over-capacity wouldn't last long - Hyundai, VW and everyone else would rush to expand capacity in low-cost Eastern European countries in a hurry in order to grab that market share. Each Western European car maker that doesn't manage to extract a premium for "premium" is now, and will remain under intense pressure, no matter how many others cut capacity or even collapse. Apart from GM, that means Ford, PSA, Renault, Fiat, and within the VW group Seat.
  
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CJinSD on May 14, 2012

Moving cheap junk production to high cost plants for political reasons; GM.

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- Syke on May 14, 2012
  
  Last I looked, neither the Cruze or Sonic are cheap junk - except to the deliberately blind who are determined to pretend that its still 1999 in GM-land.
  
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- Hildy Johnson on May 14, 2012
  
  @Syke "Cheap junk" isn't the term I would have used, but it's clear that the Cruze and Sonic would slot in at the low end of the market and wouldn't sell for enough money to cover the costs.
  
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- Moedaman on May 14, 2012
  
  Have you even driven a Cruze? Well I have and it's as good as the Civic and Focus and better than the Elantra and Corolla.
  
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- Highdesertcat on May 14, 2012
  
  @moedaman But the question to be answered remains if European Chevrolet vehicles made in Opel plants in Europe will sell. Europeans are not stupid. In many ways they are far more astute and resistant to the BS that Detroit has been spinning in North America since the beginning of automotive history. Remember when NEW!, IMPROVED!!, BETTER THAN EVER!!! was the annual mantra for Detroit? And every year, year after year, it turned out to be the SSDD. And one trait not coveted by Americans that Europeans and Asians share is that they demand fair value and high quality for their money. Not exactly a hallmark trait for anything GM, as history tells us. That could be yet another reason for the mass exodus away from GM in the past, resulting in its ultimate demise, nationalization and taxpayer-funded on-going life support. So, my guess would be that European Chevrolets made in Opel plants will not sell any better than they do now and will only demonstrate the redundancy of the Opel plants in a few years. I see this as delaying the inevitable Opel plants closing in Europe. BTW, I strongly disagree with your comment about the Elantra. The Corolla, maybe, I don't know. Never owned one. But the Elantra is an outstanding value in quality, content, warranty, durability and reliability when compared to a Cruze of any matching trim level. Then again, taste in cars in subjective and so is a buyer's willingness to spend their money for what they believe in. Given a choice, I'll take an Elantra over a Cruze anytime, for any like purpose. Just the warranty on the Elantra should tell you that Hyundai has greater confidence in their product than GM does in their Cruze.
  
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- Moedaman on May 14, 2012
  
  @moedaman highdesertcat, I was talking about the overall impression I got when I test drove all of those cars recently. I did end up with the Civic. But the Focus and Cruze were very good in their own right. While Hyndai has a lot of confidance in the Elantra (given by the warranty), it did feel, to me at least, not as comfortable or built as well as the Civic, Cruze and Focus. While the Corolla just felt blah to me. And you've got to be kidding about Europeans wanting high quality for their money compared to Americans. If that was true; Fiat, Land Rover and Jaguar would be gone. Americans want more quality vehicles. We're willing to put up with blander "Camcords" that will last 10 years/150,000 miles than play "russian roulette" with European brands (most of which aren't sold here anymore).
  
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- Highdesertcat on May 15, 2012
  
  @moedaman I made the comment about Europeans demanding high quality based on my eight year tour of duty there and because I have so many family members in Germany and Portugal (my mom was German, my dad Portuguese). My observation of Europeans is that they are mostly frugal and unlike Americans, rarely carry huge debt except for housing. They just don't have as much disposable discretionary income as Americans in the same income brackets do and they spend their money prudently. They also pay a lot more in taxes and fees for the privilege of living where they do. In America nearly 50% of the population pays no income taxes at all. In Europe everyone pays taxes (income, personal property, consumption, road, fuel, utility-use, parking, insurance, inspection, transactional, etc) because taxes are levied everywhere and on everything, like VAT for instance on cars. The whole car-ownership philosophy is different between Europe and America. People who can afford to buy a new car in Europe tend to be a lot more finicky about it, like the people in Asia. I've been buying cars since I was 16 and to me cars are a necessary mode of transportation, some more fun to own and drive than others. When we bought our very first foreign car for US use in 2008 I was surprised by the quality of that Japan-built Highlander. It was so much better than my wife's '92 Towncar which was a luxury car. Now I am pleasantly surprised by the quality of our 2012 Jeep Grand Cherokee Overland Summit - no slouch in its own right and imported from Detroit no less. Maybe American auto manufacturers have finally turned the corner in quality although Jeep is now owned by Fiat, a foreign company. Still, even if quality is the close to the same, there still is a wide margin in value and content when comparing American brands with the equivalent foreign brands, i.e. Cruze vs Elantra, Focus vs Corolla, and so on. We can tell if the American brands have come up to the level of the foreigners when we see the market share and sales numbers shift in favor of the domestic brands, Ford and GM. That may happen in the future, but it hasn't happened yet.
  
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Msquare on Oct 26, 2012

I would certainly not dispute your experience, but European car owners in the States have very different ones. Here, you buy Euro for style and performance and live with any other issues you encounter. Hondas and Toyotas used to get slammed by European media not for their quality, which was clearly superior, but for their dullness in character and in driving experience. And Euro manufacturers continue to use that as a selling point over their Asian rivals. However, I can see Europeans taking better care of their cars first because of the investment and second because of the rigid inspection requirements like the UK's MoT and France's controle technique. You don't see too many hoopties on the roads. But you'd have a hard time convincing most Americans that European cars are comparable in quality to the Japanese.

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