Soul searching at GM after selling Opel – USA TODAY
DETROIT — General Motors’ $2.2 billion deal to sell its European operations reshapes the global auto industry.
For the first time in decades, GM management must figure out exactly what the company is, if it’s no longer competing to be the world’s largest automaker.
What can GM accomplish without pouring resources into the high cost, low-profit European market? Can it dominate the 21st Century’s boom markets: China, India and maybe South America?
“If you can make it in those countries, why bother with Europe?” Kelley Blue Book executive analyst Rebecca Lindland asked.
GM announced Monday that it will sell Germany’s Opel, Great Britain’s Vauxhall and its other European operations to France’s PSA Groupe, a capable automaker known for Peugeots and Citroens.
It’s now left up to PSA to see if Peugeot can leverage its new German brand for global growth that reduces its reliance on Europe. It might even challenge the ailing Volkswagen Group, which has the most market share in Europe. Maybe Opel can finally establish itself globally as a German prestige brand, a dream that eluded it under GM.
Europe is a challenging market. Customers expect the latest technology and features in small cars that sell at low profit. GM needed Opel when it relied on its European designers and engineers, but shifting sales, profits and technical resources mean the company may be able to get what Europe supplied from other, profitable, parts of the world.
GM will rely more on engineering and design resources in Asia. The learning curve must be steep, or the consequences will be grave.
Expect Chinese engineering and design centers to lead the development of most Buick passenger cars. Korea may become GM’s engineering center for compact and subcompact vehicles.
“GM’s Chinese and Korean tech centers will have to grow up really fast,” IHS Automotive senior analyst Stephanie Brinley said.
Less than 20% of Opel/Vauxhall’s future product line overlapped with GM’s global plan, adding to Opel’s costs and reducing the benefits the group brought GM. PSA builds similar vehicles and will switch Opel’s vehicles to its architectures, drivetrains and technology quickly.
The first Opels using PSA platforms — a pair of crossover SUVs — go on sale this year. They were developed under a deal GM and PSA struck in 2012. The Opel Crossland X small SUV debuting at the Geneva auto show in Switzerland tomorrow provides a glimpse of how Opel and PSA work together.
PSA can sell Opels based on its technology anywhere in the world, but models developed by GM are limited to Europe.
“Opel and PSA have the same kind of customers. They understand them and know how to satisfy them,” Lindland said. “That can overcome a lot of challenges in a merger.”
Amputating GM’s European arm is neither simple nor painless. GM acquired Opel and Vauxhall in 1929 and 1925, respectively. They sell 1.2 million vehicles a year and are integral to GM’s global design and development system.
Despite that, Opel/Vauxhall became a money pit that cost GM $20 billion in the last 20 years as much due to decisions made in Detroit as failures in Europe.
Opel was GM’s cash cow in the ‘90s. It earned billions and achieved profit margins akin to Toyota. Europe offset GM’s struggles in North America and funded expansion into Asia. Money Opel leadership wanted for product development at home helped create the Asian powerhouse GM will focus on now.
The days when GM competed for the title of world’s largest automaker are over for the foreseeable future.