Thursday, February 28, 2019

Opel Did Something It Couldn't Do Under GM


After just a year under Groupe PSA, Opel has achieved something it couldn’t go under General Motors control: turn a profit. The automobile group which also includes Peugeot and Citroen celebrated a “historic” profit at Opel last year of USD 979,000 million compared to a loss of USD 179 million in the last 5 months of 2017 just before GM opted to turn over the brand to Groupe PSA.

Though Groupe PSA had every intention of turning around the Opel business, what is surprising is how the management was able to deliver it 2 years earlier than promised. Opel earned 4.7 percent return on sales of 18.31 billion Euros compared to Volkswagen’s 4.1 percent (and that figure excluded charges stemming from diesel-gate).

Though analysts said GM laid down the foundations for Opel’s turnaround plan (such as a strong marketing campaign and segment-leading products), Groupe PSA managed to do one thing that GM couldn’t: take on Opel’s powerful labor unions. Through negotiations, Groupe PSA was able to cut 3,700 manufacturing jobs in uncompetitive factories in Germany and transfer 2,000 posts at Opel’s R&D center in Germany to France. In addition, Groupe PSA eliminated heavy discounting to maintain pricing just as Peugeot and Citroen did. This has reduced the number of new vehicles sitting at dealer lots by 32,000 in Europe.

This news is timely for Opel which is celebrating its 120th anniversary. It also casts a grim picture on the way GM does business. It must be noted that strong labor unions and heavy discounting have been two strategies the American carmaker has been employing globally.

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