By Jay Nagley
Since 2000, there have been a number of momentous announcements concerning Vauxhall, but arguably none more significant than the low-profile exit of Chevrolet from the European market late last year. To understand why, we need to look at some of those earlier, more newsworthy announcements.
Jay Nagley was a market analyst at Porsche Cars GB before spending the past 13 years as the head of Redspy Automotive, his own analysis and forecasting consultancy.
Back in 2001, Vauxhall closed Luton after the Vectra fell far short of its sales targets. So far short, in fact, that some suppliers (who had tooled up for volumes that never materialised) took the unprecedented step of publicly warning GM that if its forecasts did not improve, they would withdraw co-operation.
Then, in 2009, GM went bust and put its European operation up for sale. The German government’s preferred bidder, Magna, was rejected after intense politicking and ferocious rows between GM and Berlin. GM was left with Opel /Vauxhall, but had no clear idea of what to do with its problem child.
In 2011, rumours resurfaced that GM wanted to dispose of its perennially loss-making operation, but nothing happened. It was not hard to see why there was so much speculation. Since 2000, GM has lost £10 billion in Europe and plenty of US analysts have pointed out the potential boost to GM’s share price if those losses were to disappear.
GM cannot turn its back on Europe
The closure of Chevrolet’s European operation is a far more compelling piece of evidence than any amount of PR reassurance. Without Chevrolet in Europe, GM has no choice but to try to turn Opel and Vauxhall around.
GM is still one of the three biggest global players (along with Toyota and VW) and it can hardly turn its back on Europe. Despite current economic woes, Western Europe still accounted for 11.5 million cars in 2013 and should gradually climb back towards 15m. Europe, China and the US are the three great pillars of the global car industry – without Europe, GM would look like a two-legged stool.
So can Opel and Vauxhall be turned around? The talk from Luton is bullish, with plans to overtake Ford by 2016. However, that scenario is not actually in Vauxhall’s control.
To see why, take the battle between the Corsa and the Fiesta. The Corsa is 37,000 units a year behind its rival, which accounts for most of the gap between the two manufacturers. Vauxhall says the next Corsa will be a leap forward and yes, it will be, but that is not really the point.
The question is will it be much better than the current Fiesta or, more importantly, than the next Fiesta? To make up that gap, the next Fiesta would have to be a disaster, and looking at the last couple of generations of Fiestas and Focuses, how likely is that? Put another way, Vauxhall is like a football team six points behind the league leaders with three games to play. Vauxhall can win its remaining games, but that won’t help unless the leaders lose theirs.
That points to another issue – just how much does GM’s top brass really understand the European market? One of the US bigwigs said a couple of years ago that Chevrolet would be the value brand, leaving Vauxhall and Opel to become more premium – “more like VW”. The idea that Vauxhall could flick a switch and become VW was worrying – who could imagine that was a realistic scenario?
Similarly, the idea that the Cascada was the answer to Vauxhall’s problems suggested someone failed to understand the question. Four-seater semi-premium cabrios have been a disaster in Europe – even VW cannot sell the Eos. Using a car like that to give other Vauxhall models an image boost does not seem a sensible use of cash for such a troubled company. To put it simply, if you want to give the Corsa an image boost, make a better Corsa.
One industry executive talks of getting the “hamster wheel” running in the right direction – getting the product right and the production levels balanced, so image improves and profitability goes up. For much of the early noughties, Vauxhall was making mediocre products in too-high volumes and selling them via ever-higher discounts.
The products are now much better, but the hamster wheel has been slowed, not reversed. Getting it to change direction takes years of painful adjustments, which do not sit well with most executives’ career objectives – why go through the pain only to see the next guy enjoy the benefit?
However, there is no alternative in the long run. All the halo cars in the world will not help if the core models are unattractive or over-produced.
Vauxhall is definitely here for the long haul. Now it needs to make the product improvements and production cuts that mean it can be also be profitable in the long run.