German carmaker Opel is still losing money six months on from its takeover by France's PSA Group. The new owner's first priority is to return Open to profitability. How is the effort progressing?
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On Thursday, French carmaker PSA reported its annual results for the first time since it took Opel-Vauxhall over last year — the lossmaking division previously run by US auto giant General Motors (GM).
The German carmaker and its British unit lost €179 million in the last five months of 2017, a steeper decline compared to the $257 million it lost in the whole of 2016 under GM's management, but not as steep as some had been expecting.
Opel posted €7.2 billion of revenues, short of the €7.7 billion that had been expected by analysts. The whole PSA group, which includes Peugeot, Citroen and DS brands, reported a 23 percent rise in full year profits and a rise in its margin from 6.0 percent in 2016 to 6.1 percent last year. Without Opel-Vauxhall, PSA’s margin would have been 7.1 percent, the company said.
Carlos Tavares, PSA chief executive, told the Financial Times (FT) that Opel management "became loose" during the transition to the new ownership, leading to a decline in performance. "In an automotive market which is so demanding, as soon as you have a little bit less focus on the business, things can go south very quickly," he said, before adding: "I am very confident with everything I have seen so far of the turnaround at Opel, I believe it is going to work."
Lightning bolt loses its spark
The PSA takeover of Opel was, in a way, a return to old bicultural roots: Opel's founder Adam Opel had spent an early part of his career in Paris learning to build sewing machines.
Between 1902 and 1907, some of the earliest cars the company produced, after control of Opel had passed to Adam's widow Sophie and their sons, were based on designs licensed from Darracq, a French carmaker.
However, provisions for about €200 million in future payouts related to a moderate workforce reduction are included in this amount. The "real result" is an operating loss of around €800 million. "But it certainly reflects a very tense situation," auto industry analyst Jürgen Pieper of Metzler, a private merchant bank, told DW.
One salient number is that the German car market grew by double digits in January, but Opel's sales figures year-on-year showed almost no growth, so its market share continued to decline.
Integration is not gaining momentum
In Pieper's view, the integration of Opel into the PSA group has barely begun, as yet. However, it has only been a few months since the takeover and such a complex process can take two to three years. For that reason, cost-cutting measures are likely for the next while, Pieper said, in order to speed up the process.
Opel's course-correction will be guided by a restructuring plan called "Pace," which was formulated in November 2017. The plan includes a push for development of new car models. By 2020, at least four electric vehicles are to be on offer, and by 2024 there will be an electric variant of every model in Opel's catalogue.
There is some good news on the sales front, according to the managers in Rüsselsheim. In December, 4,720 Opel SUVs were newly registered in Germany, according to the Federal Motor Transport Office. That means Opel is currently the number one automaker in Germany in the SUV segment.
Austerity measures: the key to short-term progress
The company has already adopted a number of cost-cutting measures.
One of them has been to put workers on short hours during a six-month period in its factories at Rüsselsheim, Kaiserslautern, and Eisenach. Partial retirement programs are being extended, too, with some older workers on part-time rather than full-time contracts. The number of temporary workers is being reduced.
At Opel's plant in Zaragoza, Spain, agreements were concluded with the 5,400 employees for moderate wage developments and more flexible working times. More than 700 jobs will be eliminated at Vauxhall's UK plant. And volume discounts from parts suppliers, achieved by bundling purchases with parent company PSA's Peugeot and Citroen divisions, should also help drive down costs.
Jürgen Pieper believes Opel is on the right track: "Quick successes are initially more likely on the cost side; efforts at saving money will have a key role."
Opel is also a global brand again, looking to sell into markets world-wide. The company wasn't allowed to sell outside Europe during the years it was a division of General Motors, because the US parent company feared its German subsidiary's products might out-compete GM's domestic American models.
By far the most important opportunity, however, will be the enormous Chinese market, which is fundamentally receptive to new brands, especially if — as in Opel's case — they come from Germany.
Africa in view
Metzler Bank's car industry analyst believes that the Opel leadership's plan to target markets in North Africa for future export opportunities is also realistic.
"These impulses are certainly coming from Peugeot. The French are traditionally represented in African markets, which are their — so to say — 'backyards,' which they've served for a long time. And they've not developed badly."
According to Opel CEO Michael Lohscheller, new dealership agreements for Tunisia and Morocco have already been signed, as of January.
Pieper believes that if there are signs of improvement and reductions in losses by the end of 2018, the current moderate pace of restructuring will continue, and will eventually lead the company back to profitability. "Ultimately, I expect that by 2020 or 2021, we will see black ink under the bottom line."
Germany's best cult cars
They're enough to bring a tear to any car-lovers' eye. From VW to BMW, Opel to Mercedes-Benz - German carmakers have created countless cult models. Here are the best of the best.
Image: picture-alliance/dpa/P. Kneffel
Trabant 601 (1964)
The Trabant was to the East what the VW Beetle was to the West - a vehicle for the masses. It was cheap to produce, with an outer body made of hard plastic. The car's moment in the spotlight came with the fall of the Berlin wall, as citizens of the DDR spilled over the newly open East-West border in their "Trabis." There are still some 33,000 Trabants roaming the streets of Germany today.
Image: Imago/Sven Simon
VW Beetle (1938)
There's no stopping this faithful old model. With more than 21 million units having rolled off the production line, the VW Beetle is the most famous car in the world. From 1938 to 2003, its design never strayed far from the original - think "Herbie," or his German movie counterpart "Dudu."
Image: picture-alliance/dpa
VW T1 (1950)
The colorful VW Campervan, know as a "Bulli" in Germany, became a symbol of the hippie movement. Volkswagen wasn't initially too pleased about this, but it didn't do their sales any harm. More than 10 million VW buses have been sold since the model's introduction, of which 1.8 million were T1 models. They've also had an impressive film career - although mostly in supporting roles.
Image: DW/M. Reitz
Messerschmitt Cabin Scooter (1953)
With three wheels and an aerodynamic body, it should come as no surprise that Messerschmitt was originally an aircraft manufacturer. After the Second World War, with production at a stand-still, the company agreed to work with engineer Fritz Fend on his "Flitzer" car model. It was a short-lived partnership - in 1956 Messerschmitt went back to aircraft production.
Image: picture alliance/dpa/H. Galuschka
Mercedes 300 SL (1954)
This car was nicknamed the "Gullwing," thanks to its wing-like doors. The 300 SL Silver Arrows racing car earned Mercedes-Benz a surprise comeback on the motorsport scene. After wins at the 24 Hours of Le Mans and Carrera Panamericana racing events, a street version went into production.
Image: Daimler AG
BMW Isetta (1955)
It may not be speedy, but the BMW Isetta was still a financial success story for BMW between 1955 and 1962. Cheap and practical, this microvehicle with a motorcycle engine was known as a "bubble car." It opened at the front, just like a fridge.
Image: picture-alliance/dpa/P. Kneffel
Goggomobil (1955)
Another microcar with cult status is the Hans Glas "Goggo," named after the owner's grandson. Unlike other mini vehicles that had come before it, the Goggo could hold up to four people - although, given the car's 1.6-meter length, it was a bit of a squeeze. One of the car's key selling points was that it was so compact you only needed a motorcycle license to drive it.
Image: picture-alliance/dpa/S. Gollnow
Porsche 911 (1963)
With more than half a century of production behind it, the 911 is among the longest existing models in automobile history. In all its reincarnations, the trademark Porsche model has retained its most memorable features. With its striking headlights and its steep-sloped rear, the 911 is instantly recognizable.
Image: picture-alliance//HIP
Mercedes-Benz 600 (1964)
An in-car telephone, air conditioning and a freezer compartment were just some features of the German luxury sedan of the 60s and 70s. It attracted an endless list of celebrity owners, from the Pope to John Lennon. It was a little too pricey for the German government's liking, but they did rent one for special occasions, such as the 1965 state visit of Queen Elizabeth II.
Image: picture-alliance/dpa
Opel Kadett B (1965)
According to a song by German punk band WIZO: "Whether limousine, estate or coupé - the coolest car is a Kadett B." It seems 2.7 million customers agreed, making this one of Opel's most successful models. In the early 70s, Opel used the advertising slogan "Das Auto" for the Kadett B - long before their rivals at Volkswagen recycled the phrase.
Image: S. Storbeck
Wartburg 353 (1966)
The Wartburg, which takes its name from a castle in the car's home town of Eisenach, was largely produced for the export market. The cheap vehicles found some success in countries such as Hungary and Great Britain. Back in West Germany, however, demand was low - owning an East German car would have been quite the political statement.
Image: picture-alliance/ZB/J. Wolf
NSU Ro 80 (1967)
When NSU presented the Ro 80, rival manufacturers were watching closely. The car's twin-rotor Wankel engine, which was named after its inventor Felix Wankel, earned it the title "Car of the Year 1967." Unfortunately the technology wasn't quite ready, and NSU began replacing the motors as a precautionary measure. This unsettled potential customers and the car ultimately flopped.
Image: picture-alliance/dpa/W. Gutberlet
Mercedes Benz /8 "Stroke Eight" (1968)
The conservative W 114/115 series sedan was hardly the fastest Mercedes around, with a top speed of 130 km/h. That makes it perhaps all the more impressive that it was not uncommon to find a Stroke Eight with several million kilometers on the clock. The quality of the car earned Mercedes 1.9 million satisfied customers - and the Stroke Eight became a collector's item.
Image: R. Stricker
Opel GT (1968)
"Only flying is better," is how Opel advertised its answer to the American "muscle cars." Sweeping curves, supposedly reminiscent of a Coca-Cola bottle, and pop-up headlights completed the car's unique look. An affordable price tag meant the car also attracted attention in the United States.
Image: picture-alliance/dpa/R. Weihrauch
VW Type 181 (1969)
Initially produced for the German army, VW marketed the Type 181 as a multipurpose leisure car for young people. It offered little in the way of comfort, but a retractable roof transformed this austere jeep into a convertible. The Type 181 was warmly received in the US, where it was known simply as "The Thing."
Image: picture alliance/dpa/JOKER
Opel Manta (1970)
What Opel intended as a middle-class sporty model quickly became a must-have item for young men. Cue countless jokes about Manta drivers and their modest IQs. Film producer Bernd Eichinger paid tribute to the car in his 1991 comedy "Manta Manta," which co-starred a young Til Schweiger.
Image: picture-alliance/dpa
VW Golf (1974)
In 1974, VW brought its first Golf model to market, billing it as the successor to the beloved Beetle. For a subcompact car, the Golf was surprisingly sporty and efficient - a big advantage following the 70s oil crisis. The car's success took even VW by surprise, and the convertible model, nicknamed the "Strawberry Basket," became a sought-after cult car.
Image: picture-alliance/dpa
Audi quattro (1980)
"Quattro," Italian for four, refers to the car's four-wheel drive element. This unique coupé caused quite a stir upon its release. Four years later, Audi brought out the high-performance Quattro Sport (pictured). Only 220 units were produced, making it a real collector's item. More than 11,000 units of the original version, known as the "Urquattro," were made.