GM in Europe has recently moved into the black following a period of restructuring and cost cutting. On the sales side, new brands introduced to Europe – most notably Chevrolet – have been at the centre of growth strategies. Jonathan Browning is GM Europe’s VP for sales and marketing, with responsibilities that also embrace brand integration, aftersales and distribution. He also has operational responsibility for GM Europe’s national sales companies. Dave Leggett met up with him in London last week.
Are you happy with the way that GM is currently performing in Europe?
We’re taking a lot of encouragement from how the turnaround of General Motors Europe is progressing. We saw a strong first quarter from a financial point of view with a EUR180m+ turnaround year-on-year so that the first quarter was our first profitable Q1 since the turn of the century. We feel we’re making good progress in terms of the turnaround, taking a number of actions on the cost side in terms of our manufacturing operations and our footprint. We’ve got to keep working at that, but we’re also now seeing the revenue side, the volume and the profitability moving in the right direction.
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One of the most encouraging things is that if you look at the progress we have made since 2004, the cost and the revenue sides of the business have pretty much evenly driven the progress that we are making. Sometimes there’s a sense that we are just trying to save our way to success and that’s far from the truth. We are seeing growth and revenue development as well. We’re definitely encouraged by the momentum but no question about it, we’ve still got a long way to go and we’ve only just got our noses above the parapet of financial breakeven.
Where is the growth coming from?
If you look across the GM Europe portfolio, clearly there is a lot of volume growth in terms of Chevrolet and Saab. For Opel/Vauxhall what we’ve said is that we really want to go after the quality of sales rather than, in some cases, the volume. Specifically over the last two years we’ve actually backed off around 50,000 units of very marginal fleet business. We’ve reduced the short-cycle fleet business, which we define as any vehicle that comes back onto the market within 12 months, by taking 50,000 units out over two years – the step from ‘04 to ‘05 and ‘05 to ‘06. We’re looking to remix some of the Opel/Vauxhall volume.
Overall, for Opel/Vauxhall, there is a volume decline of around 25,000 units in the first half of this year. There has been some volume contraction, but we’ve increased per unit revenue, which was up by over US$1,000 in the first quarter, which is why I talk about quality of sales. We’re really driving the right business mix as opposed to any business mix.
What about Cadillac – how is that doing in Europe?
Cadillac was always going to be a project that would take a while to become established in the European marketplace. There has been some volume growth, admittedly from a low base, but I think we have got to be very patient with building Cadillac in terms of market acceptance and people understanding the offer that comes with Cadillac. It will take time. I am reassured that we now have the BLS in the marketplace. That’s an opportunity to grow over time, but it’s not a light switch that you just flick on, one day to the next.
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By GlobalDataWhat national markets, in Europe in recent years, give you encouragement?
In terms of Western Europe the UK market stands out in a number of respects. To take the Vauxhall brand for example, that went through a period when it was seen as providing only a kind of functional purchase and if you needed a vehicle to do this, this was the vehicle for you. I think we’re now seeing, with a combination of Zafira, Meriva, Astra and now with new Corsa, an intrinsic appeal to the vehicles that is growing.
And one of the most encouraging things with the new Corsa is that we’ve taken it through product development and the research process and the feedback from customers to Corsa is real pleasure in terms of the aesthetic, the interior and exterior, but also a lot of acceptance of the technical content of the vehicle. So there’s a combination of a very rational, as well as an increasingly emotional acceptance of the Opel/Vauxhall product. When Opel and Vauxhall have been strong in the past it has been when they have combined those aspects. I think with Astra and with Corsa we’ve really got a strong combination of those two aspects.
Is the objective to reposition Vauxhall/Opel further upscale so that Chevrolet becomes the major value brand for GM?
Chevrolet will be our foundation brand but the danger is that if you talk about ‘upscale’ for Vauxhall it can be interpreted as moving up the price ladder and up the competitive hierarchy. We’re not looking to do that. What we are looking to do is to position Vauxhall and Opel amongst a more progressive customer segment. It is a segment that is looking for a combination of great appeal from a design point of view, very functional vehicles, but also vehicles with some key technological content.
For example, the adaptive forward lighting on the Corsa is a segment first. Those sort of added technological elements are very important to that customer group. Whereas for Chevrolet, it’s similar sized vehicles at lower price points and not that same level of technological content. The technology for Chevrolet is much more proven, well-established technology as opposed to first-in-segment technology that we will look to bring in on Vauxhall and Opel.
How is progress in establishing the brand portfolio, in Europe?
Are the brands growing together? Are they working together in terms of the retail network and from a customer point of view? What we see is a record first half of the year; we’ve got Saab up 24% across Europe so Saab is going well within the family. We’ve got Chevrolet growing very strongly. We’ve got a fighting chance of getting very close to 300,000 sales for Chevrolet this year across Europe and that’s from virtually a standing start.
Each of the brands is beginning to prosper and we don’t see significant customer cross-shopping between the brands. When we look at customers’ second choice of vehicle and what they are trading in, there’s very little overlap between the brands. The brands fit together quite nicely within Europe and it’s working well.
Saab has benefited from some product action lately, notably the addition of the 9-3 Sportwagon, but is there enough product action in the pipeline to maintain sales growth momentum?
I think it is important when you look at the Saab portfolio today and you can see that the [9-3] Convertible is almost an icon within its segment, that we’ve added the 1.9 diesel, that we’ve got the various anniversary editions, that the 9-3 Sportwagon is still early in its life and that the 9-5 has had a mid-cycle refreshening – so the portfolio that Saab has got in the market today is pretty fresh and we’re clearly seeing the benefit of that in terms of the volume development.
Having said that, we certainly recognise that Saab needs to continue to grow to become a sustainable, viable business itself. Work is going on in terms of looking at ‘what are the right opportunities to expand the portfolio?’ The simplest thing to say is that we have got more ideas than we have money, but we have to be very select in terms of additions to the Saab portfolio. One of the lessons overtime has been that if you are looking to grow a brand, you need to make sure that you keep investing in the core products that already exist in the brand. It would be wrong to add other products around the 9-3 and 9-5 and not invest sufficiently in the core products, 9-3 and 9-5. We will expand the portfolio but we will keep investing in the 9-3 and the 9-5.
How is GM doing in Central and Eastern Europe?
There’s a range of markets across that area where tremendous progress is being made. To take Turkey, for example, there’s huge market potential, we’ve got one of our strongest dealer bodies in Europe in Turkey, very well invested and very well positioned in the three main markets of Istanbul, Ankara and Izmir. It’s a very good solid footprint. It’s a market with quite a lot of volatility, it’s going through a foreign exchange crisis at the moment, but we’ve got a very strong base. We launched Chevrolet two years ago and that’s growing well.
If we swing up through southeast Europe and let’s take a market like Croatia, we’re the market leader there. In fact, we have the highest penetration of any European market in Croatia at just over 17% of the market (2005). Hungary is a very good market for us, Poland with our market presence with the manufacturing facilities, again a very solid base.
But the two markets that really stand out right now are Ukraine and Russia. In terms of total market development, the European market so far this year, as we define it, has grown by around 400,000 units and of that, Ukraine and Russia account for over 50%. These two markets are really driving growth. In Russia this year we expect to sell 75,000-80,000 units, all GM brands. We have always traditionally thought in terms of the Big Five markets in Europe – Germany, UK, France, Italy and Spain. Russia is going to be very close to falling within that category within another 18 months. It is phenomenal the growth that is going on there.
Is it still mainly cash buyers in Russia or is consumer credit infrastructure developing?
There is some credit, but most of the credit infrastructure is targeted at the wholesale financing, the retail operations. Retail financing in the traditional Western European sense is somewhat limited but that infrastructure is definitely growing.
What about the markets needing attention?
Well, Germany has been our big market that’s needed a lot of work over the last the three or four years. What are the things that a sales and marketing organisation needs to be strong in the marketplace? It’s fairly simple: it’s product and it’s a dealer network. In Germany, over the last three or four years, we’ve strengthened those two areas; getting the right product into the market for Germany and strengthening the dealer network. And what we’ve seen over the last couple of years is stabilisation of the dealer network in Germany, with some consolidation of the network going on, but not at the same level as in, for example, the UK.
And the product is getting a much greater level of acceptance. For example, last year, Opel in the passenger car segment actually moved down to third place, behind Mercedes; it was VW, Mercedes and then Opel. But at the end of last year we actually moved back ahead of Mercedes in the passenger car segment and reclaimed the number two spot and we have sustained that in the first part of this year as well, despite Corsa being in run-out phase.
Germany is clearly an important market within the European landscape and it’s not yet where we would like to be, but it’s beginning to turn the corner.
In terms of product, what went wrong with the Signum? It never really flew did it?
I don’t think anything went wrong with the product itself, but the market opportunity was fairly limited and the close relationship between the Vectra and the Signum also hindered the broader acceptance of Signum. But market volume was always going to be relatively limited, but it’s interesting that we have put a facelift on Vectra and Signum and we have seen, from a retail market point of view, quite strong growth for the Vectra and Signum, specifically here in the UK.
As I say, Signum is a limited opportunity but it has kind of almost got into its stride with the facelift. It’s encouraging.
You said that you have stepped back from fleet business, but the fleet business is nevertheless important isn’t it?
You have to be careful with definitions, but on a fairly loose definition, the retail/ fleet balance is about 50:50.
Is Chevrolet gaining fleet business?
If you look at the progression through our line-up of brands, Opel/Vauxhall is in the middle. Saab sales are heavily business supported in some way – not traditional fleet business, but strong in sales to small businesses, the professions, people like architects, for example. Around 70%-80% of Saab sales are, in some way, business-related. Chevrolet is exactly the reverse – we do very little true fleet business with Chevrolet. The two biggest volume markets for Chevrolet in Europe are Italy and Spain and in those markets there is a little bit of fleet business that goes on, but in the UK it is almost non-existent.
Will that change?
When you look at vehicles like Captiva, I can well see that vehicle coming into leasing offers and being a vehicle that offers some choice in those categories. If you look particularly at the leasing sector as part of that total fleet mix, then yes, that will increase. But I don’t see Chevrolet going aggressively into the corporate fleet or short-cycle business.
When do you think we will see hybrids among GM brands in Europe?
Over on the Saab stand we are showing a two-mode hybrid concept. Hybrids will come, not immediately, but they will come. One of the issues I keep banging on about is that I think the government is, today in the UK, absolutely missing an opportunity to drive alternative fuels much harder. There’s almost a fixation with hybrids that are not the best economic and environmental combination and there’s a lot of progress that could be made with alternative fuels. There’s been a stop-start approach to LPG in the UK and I just keep holding up Sweden as a reference point to the government.
The Swedish government touched each of the right levers and now the consumer is pulling the demand for the alternative fuels and to me, that’s such a huge missed opportunity for us here in the UK.
In Sweden they have adjusted parking charges, congestion charges, benefit-in-kind [tax] charges and required filling stations to have ethanol available. And we’re seeing, for example, on the Saab 9-5 80%+ new orders in Sweden are for the bio-powered units. And it is that sort of transition that can happen quickly if the elements are brought together properly. And we are missing that opportunity in the UK.
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Jonathan Browning – GM Europe Vice President, Sales, Marketing and Aftersales
and Chairman of Vauxhall
Jonathan Browning has been Vice President, Sales, Marketing and Aftersales, for GM Europe since December 1, 2001. In this role, he leads GM’s European brands in the areas of sales, marketing, brand integration, aftersales, and the future direction of the distribution network. Additionally, he has operational responsibility for GM Europe’s national sales companies. Since May 2005, Jonathan Browning has also been Chairman of Vauxhall.
Jonathan Browning was born in Taunton, U.K., on June 21, 1959. He gained a degree in Industrial Economics from Nottingham University and subsequently an MBA from Duke University in the United States. He began his career with General Motors in 1981, when he joined Vauxhall in the U.K. There, he held successively senior appointments in sales, marketing and general management. In 1992, Jonathan Browning became Managing Director of General Motors Turkey and, in 1993, he was appointed Executive Director Marketing for GM Europe, based in Zurich.
Between 1997 and 2001, Jonathan Browning worked for Ford Motor Company in the UK, most recently as Managing Director of Jaguar Cars Ltd.
