REPORT: Opel to cut prices 40% in order to save jobs?

Sometimes deals get made, and then the dealmakers have to employ some pretty creative tactics to get the terms to work. Magna's deal for Opel included taking €1.5 billion in short term loans from the German government, the string attached being that Magna had to guarantee German jobs.

Saving jobs means selling more cars to maintain production levels, and outside observers are suggesting that Opel would need to cut prices by 40% to move enough metal to keep people on the lines. Of course, a 40% drop in prices makes profit almost impossible, and some are saying Magna doesn't care about profits right now. One analyst said Magna and GM might want to increase costs, since Magna would sell more parts and GM would get more royalties. That, however, seem like the wilder side of speculation.

Magna has said the 40% discount hypothesis is absurd. Magna's mandate was to save German jobs -- that doesn't mean other Opel or Vauxhall factories in other countries can't be shuttered. Such a discount would also bring competing automakers into the debate; they would need to fight battles both on the dealer lot and with their government lobbyists, who would question Opel's right to sell cheap cars with government assistance.



[ Bloomberg ]
[ Tag: discount, europe, factories, magna, opel, plants, sberbank, unions, vauxhall ]

British Bailout: UK gives ?2.3B to domestic auto industry

When the U.S. domestic auto industry asked its government for billions of dollars in loans, it made world-wide news. Many other foreign nations have pitched in with funding for their own industries, as well. The UK has just gotten in on the act by promising ?2.3 billion for the cause, with ?1 billion in direct government loans and another ?1.3 billion from the European Investment Bank. The UK government is promising its citizens that the loans are "no blank check" for the ailing industry. Hmm.. where have we heard that before? The British government deemed its auto industry worth saving, mentioning that up to one million citizens count on auto jobs for income. Similar to the U.S. loan deal, the British government is looking to develop a national strategy for greener, cleaner motoring.
?2.3 billion sounds like a lot of cash (about $3.2 billion USD), but some industry insiders don't think the loans go far enough. Union leader Tony Woodley claims that nearly half of the money will need to go to Vauxhall, a subsidiary of General Motors, and Jaguar Land Rover, which is owned by India-based Tata, and that the cash infusion will do little to aid the hundreds of suppliers that are hurting just as badly.
[ Times Online ]
[ Tag: Auto industry, AutoIndustry, Bailout, great britain, GreatBritain, UK ]

Opinion: What should happen to Saturn, Vauxhall and Opel during GM's reorganization?

Amidst all the recent bailout talk, one question being asked is what role GM's Opel division will serve in a new-and-hopefully-improved General Motors. More succinctly, will Vauxhall and Saturn soldier on unchanged or will they simply fade into automotive landscape? Automotive News seems to think the question of Opel and how it relates to Vauxhall and Saturn is so important that it's worth devoting three separate editorials to the issue, with varying levels of clarity.
Richard Truett maintains that shuttering Saturn would be a "monumental mistake that would alienate many of the most loyal buyers GM has," but thinks that "Saturn fans would be cool with a transition to Opel." We think that the cars might be well-received by Saturn buyers, but that the prices need to be more budget-minded and that the overall focus of the brand needs a thorough work-over. Some Autobloggers believe that shutting down Saturn altogether would be a mistake, while some are in favor of doing away with the brand as soon as possible. Regardless of where on that fence our staffers sit, we all expressed doubt that changing the name to Opel in the U.S. would serve any constructive purpose. Clearly, if it is going to keep Saturn, GM needs to show more support for the brand, as evidenced by the Malibu/Aura situation.
So what about killing off Vauxhall, which is essentially a UK-only rebadge of Opel? Well, here we see some dissent as well. Wim Oude Weernink says that the nameplate is superfluous and thinks GM should be reduced to just Cadillac, Opel and Chevrolet worldwide. That would leave GM with premium, near-premium, and mainstream lineups, placing it in line with other successful automakers like Toyota and Ford.
Colleague Mark Appleton, on the other hand, thinks it would be stupid to kill off Vauxhall. He argues that the General should keep the storied British marque, pointing out that there is no competition between Vauxhall and Opel and that the existing line-up would be very costly to replace with a brand that has never been successful in the UK. It's much like the Saturn/Opel equation except Saturn isn't as old, by a long shot.
This author thinks that Saturn could survive and possibly thrive as a rebadged Opel line, but recent history proves otherwise. The success of Vauxhall shows that the formula can work in other markets and now that smaller, more fuel-efficient Euro cars are gaining a foothold in the States, Saturn would be an ideal brand to market Opel's wares to American buyers who want to feel like they are ahead of the curve. And the same philosophy could be applied to Ford, with Mercury getting an infusion of the Blue Oval's Euro models.
It's expensive to shut down dealerships and to change brands, and the added cost of marketing a new or unfamiliar marque is considerably more expensive than manufacturing extra badges. So keeping Vauxhall and Saturn but streamlining the offerings and manufacturing some of the cars here could help bring jobs to America and stabilize prices when the dollar and euro (or pound) are going in opposite directions. Of course there are still some who think Saturn should just die already, but Alex is always cranky after a Knight Rider liveblog, and we don't know what to make of Paukert just yet. What say you?
[ Automotive News ]
[ Tag: bailout, gm bailout, gm bankruptcy, GmBailout, GmBankruptcy, opel, reorganization, restructuring, vauxhall ]

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