Barra's move to sell Opel signals deeper change at GM

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Thread: Barra's move to sell Opel signals deeper change at GM

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    GMI Staff Member Premium Member nadepalma's Avatar
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    Barra's move to sell Opel signals deeper change at GM

    Barra's move to sell Opel signals deeper change at GM
    February 14, 2017 @ 6:10 pm
    Joseph White
    Reuters via AutoNews.com

    DETROIT -- General Motors CEO Mary Barra’s decision to put the company’s European operations on the block marks a turning point for the automaker that once prided itself on being the No. 1 vehicle maker in the world.

    If Barra succeeds in concluding a deal with French automaker Peugeot SA -- and people familiar with the discussions cautioned on Tuesday that many details are yet to be settled -- she will have delivered in an unexpected way on her promise to have GM “disrupt ourselves” rather than wait to be jolted by outside forces.

    Selling Opel will mean GM no longer seeks to be a key player in all the major auto markets, but rather is focusing on cash flow and profitability instead of sales volume.

    Bob Lutz, former GM Vice Chairman and head of product development, said on Tuesday GM could structure a deal with PSA that would still allow for joint product development, and could leave open the possibility of exporting certain Cadillac or Chevrolet models to Europe.

    “The proceeds from the sale (which would do wonders for the stock price) would permit acceleration of the business in North America and China; a far better use of resources,” Lutz said in an email, adding he had not been in contact with anyone at GM.
    Selling Opel would mean GM is setting aside those traditional measures of success to be a smaller company focused on the United States truck market, China and some -- but not all -- the large, growth markets in Latin America and Asia. Under Barra’s leadership, GM has exited Russia and Indonesia after concluding it couldn’t earn acceptable returns on investment.

    Barra has made return on invested capital, cash flow available for share buybacks and profitability the key measures of GM’s success, not sales volume.
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    GMI Staff Member Premium Member nadepalma's Avatar
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    Re: Barra's move to sell Opel signals deeper change at GM

    Good piece.

    If this is really what Barra is thinking, then perhaps GM is making the right move in putting profits before market-presence. GM could retain a stake in the "new PSA" once it consolidate with Opel. They could still co-develop products together and tap former GM resources for any collaborations.

    What's more, in selling Opel to PSA, GM could retain many of their existing engineering resources in Europe. In that regard, GME would transform into what GM Holden will eventually become --- an engineering, design, logistics (and possibly, a sales) outpost within the Empire. They could still develop engines in Germany and Italy, design cars in the UK and Switzerland; but the retail and manufacturing components will be sold off along with the Opel and Vauxhall brands themselves.

    In doing so, GM could always re-enter the market with a fresh start. Electronics brands, clothing brands, and other retail consumer goods do that constantly in many world markets (i.e. Cell phone brand X has stopped selling in Y country due to poor perception and sales; only to try again 5 years later with fresh products and a fresh ad-campaign).

    If Chevrolet and Cadillac (or GMC and Buick, for that matter) eventually try to make a "real go" of tackling Europe later on, it would allow GM to almost "replicate" what the Koreans have done. That is to say, any "new GME" resources (in design, engineering) would essentially "assist" manufacturing capacities in Korea, China, or other non-Western European manufacturing outposts. Doing so might not only diminish GM's exposure and the possibility of failure, but also let GM price any eventual products appropriately to guarantee a profit and not-step-on-the-toes of any local brands that need to keep their local manufacturing base humming (i.e. Opel/Vauxhall). [Side Thought: This could also present a way for GM to re-invigorate GM Korea, which has seen a huge manufacturing downturn after Chevrolet was pulled out of Europe. GM Korea takes a big lead on small-car development, but the manufacturing base has suffered].

    IDK. This might make a lot of sense on some level, especially as global market realities change.
    Last edited by nadepalma; 02-15-2017 at 10:18 AM.
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    Re: Barra's move to sell Opel signals deeper change at GM

    GM's hope in Europe is selling high dollar performance products such as Chevrolet Camaro, Corvette and Cadillac's and hopefully they throw in an SUV or two.
    Meanwhile, I do not see how GM competes without having right hand drive products.

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    Re: Barra's move to sell Opel signals deeper change at GM

    How would this affect Buick's line up?
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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by mbukukanyau View Post
    GM's hope in Europe is selling high dollar performance products such as Chevrolet Camaro, Corvette and Cadillac's and hopefully they throw in an SUV or two.
    Meanwhile, I do not see how GM competes without having right hand drive products.
    I don't see Camaros and GM US SUVs selling in Europe in any substantial way. GM would be essentially become a niche player on the continent. Maybe that's ok - I'm not so sure.

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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by kool1 View Post
    I don't see Camaros and GM US SUVs selling in Europe in any substantial way. GM would be essentially become a niche player on the continent. Maybe that's ok - I'm not so sure.
    Its a bad move, at most, they would move around 10,000.00 units in 20 years from now assuming the product is superior to everything available from traditional EU manufacturers.


    That said, GM is probably falling prey to short term thinking all too common in American boardrooms.

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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by johnstarnes View Post
    How would this affect Buick's line up?
    Short term it doesn't affect them at all since any agreement with PSA would undoubtedly (and affirmatively) state that GM can continue to use current products/products already in the pipeline.

    Five or ten years out, this will have an effect. However, by then GM will have shifted their focus further to China. PATAC and GM's own Chinese operations are having more and more engineering and design influence on Buick. This will only accelerate that shift. Moving forward, I'd imagine that everything that Buick will need in the medium/long-term can easily be addressed by China and North America.

    What's more, after Opel is sold off, Buick could also find incremental sales in Europe (Eastern Europe and Russia first, and then possibly in Western Europe), the Middle East, and select nations outside of Europe (where Opel currently has a presence). Taken together, that could help justify any future investments.
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    Re: Barra's move to sell Opel signals deeper change at GM

    GM was the first company to expand their lineup across different brands, dating back to the 1920s. They still have yet to perfect this business model, and I don't think a deal with Peugeot is going to save that.

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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by nadepalma View Post
    Short term it doesn't affect them at all since any agreement with PSA would undoubtedly (and affirmatively) state that GM can continue to use current products/products already in the pipeline.

    Five or ten years out, this will have an effect. However, by then GM will have shifted their focus further to China. PATAC and GM's own Chinese operations are having more and more engineering and design influence on Buick. This will only accelerate that shift. Moving forward, I'd imagine that everything that Buick will need in the medium/long-term can easily be addressed by China and North America.

    What's more, after Opel is sold off, Buick could also find incremental sales in Europe (Eastern Europe and Russia first, and then possibly in Western Europe), the Middle East, and select nations outside of Europe (where Opel currently has a presence). Taken together, that could help justify any future investments.
    Thanks! I just hope the U.S. and China don't end up a trade war or a military conflict.
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    Re: Barra's move to sell Opel signals deeper change at GM

    Ok, am I missing something?

    I am reading, "If you can't Compete, put your tail between your legs and run" Yes Europe has been a Cash Cow of sorts for sometime now, but Someone is Selling Vehicles in this Market, if everyone was losing money doing it, wouldn't the price just go up?

    Volkswagen, doesn't seem to be running away, nor PSA, Renault, Ford even for that matter. If the trend continues, where will GM sell autos?

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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by mbukukanyau View Post
    GM's hope in Europe is selling high dollar performance products such as Chevrolet Camaro, Corvette and Cadillac's and hopefully they throw in an SUV or two.
    Meanwhile, I do not see how GM competes without having right hand drive products.
    The inability to sell RHD Camaro, Corvette and Cadillacs in Australia and the UK is not that big a deal in car numbers or profits - but no bar to the LHD majority of Europe.

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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by kool1 View Post
    I don't see Camaros and GM US SUVs selling in Europe in any substantial way. GM would be essentially become a niche player on the continent. Maybe that's ok - I'm not so sure.
    I don't either. GM can't even sell the new Camaro to Americans and a Sierra or Tahoe in Europe would be like trying to sell Kenworths to soccer moms in US suburbia.
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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by nadepalma View Post
    Short term it doesn't affect them at all since any agreement with PSA would undoubtedly (and affirmatively) state that GM can continue to use current products/products already in the pipeline.

    Five or ten years out, this will have an effect. However, by then GM will have shifted their focus further to China. PATAC and GM's own Chinese operations are having more and more engineering and design influence on Buick. This will only accelerate that shift. Moving forward, I'd imagine that everything that Buick will need in the medium/long-term can easily be addressed by China and North America.

    What's more, after Opel is sold off, Buick could also find incremental sales in Europe (Eastern Europe and Russia first, and then possibly in Western Europe), the Middle East, and select nations outside of Europe (where Opel currently has a presence). Taken together, that could help justify any future investments.
    I agree with your presentation wholeheartedly.

    GM might also consider manufacturing Buicks alongside Chevrolet by just swapping grills and adding a few frills like Old GM used to do. They still do it with the Chevrolet Silverado and GMC Sierra pickups. GM claims this is still a very cost effective way to build vehicles, but I am not so sure this is the right approach to go in the future.

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    Re: Barra's move to sell Opel signals deeper change at GM

    I have mixed feelings. On the one hand, if GM can't get it's European operations to be profitable, you simply can't keep losing money, year after year. Pity to pull out of a major market however. Also, if the stated goal is to create more capital in order to sell more trucks in the US and design more cheap Chinese cars for Asia and South America - well, B-O-R-I-N-G!
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    Re: Barra's move to sell Opel signals deeper change at GM

    Quote Originally Posted by InCogKneeToe View Post
    Ok, am I missing something?

    I am reading, "If you can't Compete, put your tail between your legs and run" Yes Europe has been a Cash Cow of sorts for sometime now, but Someone is Selling Vehicles in this Market, if everyone was losing money doing it, wouldn't the price just go up?

    Volkswagen, doesn't seem to be running away, nor PSA, Renault, Ford even for that matter. If the trend continues, where will GM sell autos?
    I've been calling for something like this for years! If they can't make money in Europe now, then when!?

    The "Buick" argument has faded, fast; nothing will be missed, and even if there was something that might create a void, alternate plans can fill the gap.
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