General Motors’ global dominance of the automotive sector is coming under serious scrutiny as its rivals, especially the Japanese players, continue to offer better quality and better value products. GM is now restructuring its European arm in a bid to stem continuing losses – but the only way it will succeed long term is by building exemplary vehicles.
US based auto giant General Motors is trying to turn around its struggling European division by centralising the management of its three brands in the region. The reorganisation of the company structure is intended to increase efficiencies and save money, enabling it to speed up decision-making and react faster to market changes.
The management of the three divisions – Opel, Vauxhall Motors and Saab – will now report to a single chairman. In addition to this, all important vehicle design activities will be taken away from the brands. The traditionally strong role of Opel within GM Europe seems likely to fade as all major decisions are centralised in Zurich.
This move is a result of significant losses over the past few years, despite an €2 billion cash injection from headquarters three years ago. It was hoped that 2003 would be the year in which GM Europe returned to profit for the first time since 1999. GM’s European division continues to lose ground against its competitors and, since 2001, its share of the European market has fallen from 10.2% to 9.2%.
A major factor in GM’s problems is the poor brand image of Opel among the continent’s drivers. Opel accounts for 80% of GM Europe’s turnover, but despite the successful launch of the new Opel Astra, GM Europe still made a $US116 million loss in the first quarter of 2004.
Indeed, GM’s leadership in the automotive world as a whole has come under considerable threat. Last year for example, Japanese rival Toyota made greater profits than those of Ford and GM combined and Europe is certainly no exception to this trend. The way forward for GM in the region will be through creating synergies between the three brands to reduce costs, while working hard to create high quality cars and improve its projected image.