General Motors has recognised that the numbers don’t add up and has finally bitten the bullet on Europe. Chevrolet is to exit the region, leaving Opel and Vauxhall to ply mainstream market segments.
General Motors, let’s remind ourselves, is losing a lot of money in Europe. It was almost US$2bn last year and getting to break-even is taking time. Capacity rationalisation has been drawn-out and painful to execute. A plan to offload Opel/Vauxhall in the dark days of 2009 didn’t work out. If it had, then Chevrolet would have been at the centre of the company’s European market strategy. Deciding to keep Opel/Vauxhall made good sense on a number of levels, but it left GM with a brand too many in a seriously distressed market that could not support that.
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The problem was that the numbers weren’t adding up and tweaking wasn’t going to make them fall into line. Major surgery for GM in Europe was called for. As Stephen Girsky put it, the losses being incurred by Chevrolet were ‘unacceptable’. Brand differentiation was another problem. Chevrolet as a ‘value’ brand can certainly work, but putting more chrome on a Vauxhall or Opel to send the message that it is more upmarket was always going to be of limited success, especially in a depressed European market that is seeing all mainstream volume brands being squeezed.
So, the high-ups asked themselves in the RenCen, what would work in Europe? Some analysts returned to the idea of dumping Opel/Vauxhall altogether. That, even assuming a buyer could be found, came with issues. It would be messy. Some kind of accommodation on capacity rationalisation with strategic partner PSA was also discussed. Again, not straightforward politically and the bounds of industrial cooperation between the two groups are far from fixed or even comfortably understood, on either side.
In the end, taking Chevrolet out of Europe must have looked like the strategic operation that made the most sense. The big challenge for GM remains: get European operations profitable. That means putting Opel/Vauxhall on a sound manufacturing cost footing with the right products, brand image and marketing strategy. Removing Chevrolet from GM’s brand mix in Europe looks like a move that will help.
See Also:
US: General Motors axes mainstream Chevrolet in Europe
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