Where Does the Sale of Opel Leave Holden? by Nick De Palma March 13, 2017 Share Comments Thread As GM looks beyond Opel to trim other assets from the corporate balance sheets, is the General's Australian brand at risk? The sale of Adam Opel AG and Vauxhall Motors to Groupe PSA is making headlines in the automotive press. Most of the details have been made public, but there’s no doubt some wrinkles will emerge as GM hands their European operations over to the French automaker. After over 90 years of ownership, the Opel/PSA deal is somewhat controversial. There are several questions that need answering, but any uncertainty hasn’t stopped PSA and GM from formalizing a deal before the Geneva Auto Show. Having an arrangement in place allowed Carlos Taveres and Mary Barra to hawk the agreement as good for Opel; quell labor-related fears in Paris, Berlin, and London to gain government approvals; and spark support for the plan among auto-pundits and Wall Street. From General Motor’s perspective, however, the sale of their European operations will undoubtedly create some apprehension at the corporate family table. Though some believe that GM is foolish to divest their European assets, many applaud the measure. It is no secret that Opel has not made a profit since 1999; losing approximately $20 billion over the last 17 years. Profitability aside, there are other factors which underscore why exiting Europe makes good sense for General Motors–manufacturing in Western Europe is expensive; the market is splintered into small pieces and the regulatory environment makes vehicle development very costly. The current fiscal and budgetary realities are very different than during Opel’s most recent “hay-days” of the 1990s. The only way to push beyond such obstacles is through scale and size. Unlike the U.S. market, the European auto market is fractured into small pieces and Opel will never command huge pieces of that pie. These realities have steered GM into making a decision that was nearly unthinkable a decade ago. Still, the elimination of Opel from GM’s empire might be felt in unforeseen ways; especially on the product development side. The sale of GM’s engineering center in Rüsselsheim means that future product programs will no longer have any European design or engineering influence as they are developed. This will take years to unfold, but that fact alone might give pundits pause before heaping praise upon GM’s decision to sell Opel. GM’s strategic wisdom aside, the sale of Opel will have an obvious impact on Buick and Holden. Tucked away in GM’s Press Release was the following: “GM and PSA also expect to collaborate in the further deployment of electrification technologies and existing supply agreements for Holden and certain Buick models will continue, and PSA may potentially source long-term supply of fuel cell systems from the GM/Honda joint venture.” As expected, there won’t be any short-to-medium term effect on either Buick or Holden; but longer-term future product planning will be made without Opel’s participation. Since GM shuttered Saturn during the 2009 bankruptcy, Opel has been linked to Buick. Like Opel, the Tri-Shield brand has a limited footprint worldwide. Unlike Opel, however, Buick’s success in China assure GM’s long-term investment in the brand. Looking ahead, Buick will assuredly lean further on GM’s Chinese operations to develop products, as Shanghai is substituted for Rüsselsheim. Realistically, the Chinese influence is already prominent in many of Buick’s product and design decisions. The sale of Opel will only accelerate the a shift to make Shanghai the driving force behind Buick’s product cadence; as Detroit and Korea will continue to have important, but limited, roles. The question, then, is how Opel’s departure will impact Holden? The Current Landscape Holden presently sells a number of vehicles sourced from around GM’s automotive empire. These include a raft of Chevrolet-sourced products like Malibu, Cruze, Barina, Spark, Trax, Trailblazer, Colorado, and Captiva; mixed in with Holden’s own homegrown vehicles–Commodore, Caprice, and Ute; and most recently, Astra, Cascada, and Insignia sourced from Opel. Over the last few years, as currency-related constraints impacted the Australian market, Holden’s Opel-based product reliance shifted to Chevrolet-sourced offerings. The inclusion of Chevrolet products, however, has been met with mixed reviews. The Australian press seems to enjoy some models like Cruze and Trailblazer; while deriding others such as the Barina and Malibu. After GM’s controversial decision to end local manufacturing in Australia was announced, the plan to reintroduce more Opel-sourced models has been mostly well-received. Many of Holden’s previous Opel-sourced models enjoyed a positive image among consumers, and this appears to be a return-to-form for the Lion brand. In fact, nearly one-third of Holden’s future portfolio, already in their product pipeline, will be Opel-derived. Up until the PSA/Opel deal was announced, future products sourced from Holden were to include the Astra hatch (Astra sedan is actually the Cruze imported from S. Korea), the upcoming Commodore based on the new Insignia/Regal, and the continued importation of the Cascada convertible. Other future offerings were to consist of new or revised products such as the Acadia (GMC Acadia), “Commodore” (Opel/Vauxhall Insignia, Buick Regal), Equinox (Chevy Equinox), Holden Astra “Sports Tourer” (Opel/Vauxhall Astra Wagon), and possibly others. It is unclear if products such as the Captiva, Malibu, Insignia and others would also be retained, replaced, or supplanted by newer offerings that cover more than one segment (i.e. “Commodore” possibly replacing both the Insignia and the Malibu). Regardless of final specificity, the above is much more Chevy-dependent than Opel-reliant. However, the value of important staple products like the next Commodore and Astra can’t be under underestimated. Any replacements must be both capable and convincing to consumers. Breaking Down the Possibilities Once Opel leaves the GM corporate family, there are a few different product scenarios that could be pursued. The most obvious answer is that Holden will eventually shift it’s product partner for key segments from Opel to Buick, while continuing to supplement ancillary products from Chevrolet. The latest Insignia/Regal was designed from the get-go with replacing the current Commodore-range. Moving forward, and as China takes a larger role in a post-Opel GM, it’s entirely possible that any future Buicks designed in China will be developed from the start with a Holden variant in mind. Future models, beyond the next Commodore and Astra, may get sourced from China, even as some contemporary models get sourced from South Korea, Thailand, and/or the United States. At first this might seem odd, but importing Chinese cars to Australia was pioneered by Great Wall in 2009. Holden has been importing the Barina (i.e. Chevy Sonic) from South Korea since 2005 and the Barina Spark (i.e. Chevy Spark/Beat) since approximately 2010. And some models, such as the Mustang, are imported from the United States in small batches. There is precedence for such an arrangement. The other possibility is that any future alignment might bypass Buick entirely for Chevrolet. Though some of Chevrolet’s previous offering may not have been well received by customers, the newest batch of products have been made improvements in quality and design. If Chevrolet and Holden’s design language grows closer together, it’s plausible that Holden might sell a larger number of Chevy cars with supplemental products coming from GMC or Buick, as needed. The last and harshest possibility is that the decoupling of Holden from Opel might mean that Holden, as a brand, would cease to exist. Taking this idea a step further, there could also be the slim possibility of GM quitting the Australian market altogether. Looking at it from the ‘worst of all scenarios’ perspective, there has been a great deal of past speculation about shuttering Holden. The deletion of Opel from GM’s corporate stable might give GM the final “push” to eliminate Holden in favor of “simplifying” the global corporate stable of brands. At a later time, GM could attempt to introduce Chevrolet and/or Buick to the Australian market. Alternatively, it makes little sense to kill Holden in light of favorable brand recognition. What’s more, many articles covering the PSA/Opel deal affirmatively stated that Holden was not part of the package, despite the historical links between their operations. From a rational and logistics perspective, killing Holden doesn’t add up. Holden is well known in its home market, and the elimination of local manufacturing should help to improve profitability for their operations long-term. Looking Back and Ahead A decade ago, selling Opel and Vauxhall would have seemed unthinkable. Today, it’s already happened. The Holden of yesterday and today offers up unique pulse-inducing RWD offerings that captured the attention of Detroit’s product planners and customers around the world. However, what made Holden different within GM’s corporate empire will soon be coming to an end. In deciphering how Holden fit’s into the overall picture, it’s important to keep in mind that today’s GM seems to be willing to take chances it wasn’t prepared to consider yesterday. GM’s brass went on the record as stating that they’re still committed to Holden. In fact, they say that there are more opportunities for Holden after the sale of Opel. More over, recent news has indicated that Mary Barra intends to prune more from GM’s international assets. While the speculation seems to be focused on products, as opposed to brands, it’s entirely possible that GM might be looking at pulling out of specific markets in order to make the most of its product investments. I’ll take their word that Holden is safe; but it was only a few years ago that GM made similar statements about Opel AG– even going so far as to rebrand all of GM Europe as the Opel Group to underscore their commitment to the brand. Mary Barra’s support for the sale of Opel highlights GM’s new mantra as “profitability before market share and global presence”. The belief that GM “must exist in every market” may be changing at the Renaissance Center. The PSA/Opel deal means that GM may have conceded it no longer wishes to reclaim it’s title as the world’s largest automaker, wrestling the sales-crown back from VW or Toyota; rather, profits and long-term viability must be a higher priority. The decision to kill off local manufacturing in Australia, and turn Holden in an import and retail operation, stemmed entirely from that truth. GM has already stopped manufacturing cars in Thailand, Indonesia, and now, Europe. If Holden fails to make money in the future, could Barra cease to sell vehicles in Australia, as she has in Europe and Russia? For Holden and GM, this arguably leaves us with more questions than answers. There are still plenty of details that need to be sorted out post-divestment and it will be years before Holden’s Opel-derived products will need to be replaced. Let’s hope whatever is next doesn’t sacrifice more than is necessary to reconcile the corporate empire; or that Holden isn’t rationalized in the process… Nick De Palma is a GMI Staff Member, attorney, and car enthusiast from New Jersey. When he’s not reading about the auto industry, he is spending time with his wife and family. You can contact him at [email protected] with any questions, comments, or feedback.