Opel plans to act swiftly, cleverly and patiently to win back car buyers in its home market, the boss of the struggling General Motors Co. subsidiary said.
“We need to rebuild the image in Germany,” Opel/Vauxhall CEO and GM Europe President Nick Reilly said at the Automotive News Europe Congress in Bilbao, Spain last month. “We will need to do something significant to get the confidence back.”
Reilly added that Opel's answer to the problem will be rolled out soon.
An idea Opel is considering is a so-called “loyalty bonus.” The objective is to get the millions of people who currently own an Opel in Germany to put the brand back on top of their lists when considering a new car, Reilly said.
Opel's statistics show that 12.8 percent of the 41.74 million cars registered in Germany are Opels, but the automaker only had a 7.4 share of Germany's 1.18 million new-car sales after five months.
Put differently, one out of every eight cars on Germany's roads is an Opel but only one out of every 13 new cars sold in the country is an Opel.
The company sees this gap as an opportunity to grow.
“We clearly have the potential to regain many of our past customers and we are fine-tuning dedicated commercial actions,” said Opel spokesman Stefan Weinmann.
Quoting unnamed sources, the Financial Times reported late last month that the automaker would offer current Opel owners a 2,500 euro ($3,092) incentive to trade in their old cars for new ones. The plan resembles the state-funded scrapping program Germany ran for most of 2009.
Opel declined to share details of the program, which one source familiar with the matter said was discussed by the Opel supervisory board last week. The source added that the action "will be costly and will take time to show significant results."
In a separate interview, Reilly said Opel will not rush when it comes to it efforts to restore the brand's image in Germany.
"I think it will take four to five years to return to where we were,"
he told the Sueddeutsche Zeitung in an interview published Tuesday. "Image can be destroyed quickly but it takes a long time to rebuild."
Big drop in Germany
Opel its taking action to try and reverse a disproportionately large drop in German sales compared with its performance in the rest of Europe. (See box, bottom)
Despite having a new-generation Astra compact in showrooms, five-month sales in Germany were down 41 percent. Reilly said part of the decline is due to the end of Germany's popular scrapping incentives, but he admitted that is only part of the problem.
Opel's trouble in Germany this year coincides with the announcement that most of the 8,300 job cuts it plans in Europe will take place in its home market. Also, analysts say Opel was damaged by a long and unsuccessful bid to secure more than 1 billions euros in German state aid.
“The Opel brand, which was already weakened by quality issues, has suffered considerable damage in the year and a half long pursuit of state aid,” said Stefan Bratzel, director of the Center of Automotive Research at the University of Applied Sciences in Bergisch Gladbach, Germany. “The withdrawal of the aid request offers a chance for a new beginning, but it will be a long road.”
Jaap Timmer, president of Euroda, Opel's European dealership association, agrees that Opel has an image problem in Germany, but he foresee as rebound.
“Opel's German customers were initially confused,” he said, “but now are beginning to appreciate the fact that GM will restructure the company without German taxpayer money.”
The use of incentives is a sensitive subject at Opel.
The automaker overtook Fiat S.p.A. as the brand offering the deepest discounts in Germany in May, according to data compiled by trade publication Autohaus PulsSchlag.
Opel dealers' discounts in May averaged 12.8 percent off the list price, topping the 12.4 percent savings from Fiat, the traditional incentive leader in Germany. The industry averaged rebates in May was 10.9 percent, Autohaus PulsSchlag said.
An Opel spokesman said the survey, which based on responses from dealers, isn't representative of Opel's sales activities. In Bilbao, Reilly added that Opel has been and will continue to be more conservative than its competitors when it comes to offering incentives such as special financing conditions.
“You've got to be careful in a market that's not really there,” he said. “We are not scaling back, but we're not being really aggressive either. In a year following the end of scrappage schemes, offering incentives is like putting money in the waste basket.”
Opel's Europe dealer boss Timmer agrees: “We do not want to be the champions of discounts.”
Overcapacity issue remains
Along with plans to polish its image, Opel has promised to reduce its European production capacity by 20 percent as part of its five-year, 11 billion euro restructuring.
Opel will close a plant in Belgium and cut 8,300 jobs in Europe as part of the plan.
One analyst wonders if the cuts go deep enough.
“Opel/Vauxhall's main problem in Germany is the same problem it has Europewide: overcapacity. It's an issue it has not solved yet,” said a Frankfurt-based financial consultant who is prevented from speaking on the record by company policy.
He said U.S. automakers such as Opel parent General Motors Co. and Chrysler are no longer hurt by overcapacity after emerging from Chapter 11 bankruptcy protection much leaner.
By comparison, he says that Opel is still to large.
“Opel is the same as it was before. All it did to cut costs during the last 18 months was reduce investment in r&d and in fixed assets. That is something that will take the company two to three years to fully overcome.”