GM’s decision not to sell its Opel division to automotive-parts supplier Magna International Inc. has generated discord with workers’ unions in Germany, as well as the German and Russian governments. Union and legislative protest against GM’s decision will peak in the short term. Nevertheless, Opel’s non sale provides a glimpse of GM’s forward strategy in locations such as Eastern Europe. Moreover, the company’s choice not to divest Opel is a reflection of GM’s incr
We believe that GM is looking to push manufacturing to the local level. Locations where GM has significant R&D and manufacturing expertise, such as Germany--where GM/Opel maintains four facilities--will be increasingly important as GM looks to reduce supply chain latency between manufacturing locations and an emergent Eastern European market. Viewed in a broader context, Opel's non sale can be interpreted as a move to globally neutralize Chrysler/Fiat, which has recently established its presence in GM’s home territory.
Opel’s Astra model is manufactured at the company’s Rüsselsheim, Germany, location. This model and Opel’s sister brand, Vauxhall, represent considerable European market penetration. Ambitious forecasts put Astra sales at 500,000 units per annum. The significance of such projections should not be understated. They help explain GM’s warming enthusiasm for the Opel brand and the facilities that design, manufacture, and support the platform. GM’s support comes in spite of the fact that Opel has been losing money. Furthermore, GM has stated, albeit it quietly, that by the close of calendar year 2009, it will bring Opel plants online with its Global Manufacturing System (GM-GMS).
Opel’s addition into the GM-GMS, compounded by its excess manufacturing capacity, suits GM’s European plans nicely: Opel plants will be capable of producing GM models as well as the native Opel line, moving GM’s most significant European presence a step closer to achieving a flexible manufacturing posture. GM’s European footing serves the OEM’s hopes of meeting shifting European market demands, while mitigating restrictive costs related to long-distance shipments of the finished product.
Had GM sold Opel to Magna, it would be reasonable to assume that Magna--with Russian government intervention--would have expanded its capabilities to compete directly with GM’s Chevrolet platform, which GM views as being well suited for the Eastern European market. We contend that GM’s Opel and Vauxhall lines may suit this market just fine, and perhaps GM is overextending itself by expanding manufacturing and distribution of the Chevrolet brand. Whatever GM decides, it will leverage Opel’s existing infrastructure to act as both a manufacturing base and a sales channel for its brands in Europe.
GM’s decision to retain the Opel brand in its global portfolio was determined less by current economic realities and more by future product and profit opportunities. By maintaining existing Opel infrastructure and technical expertise, GM appears willing to absorb the negative blows that come from union and public-sector squabbles as costs of doing business in the global automotive space, where rules, process, and boundaries have shifted with economic and market realities.