Opel CEO explains what's next for the brand after 'challenging' 2020

Despite declining sales and a difficult economic environment due to the coronavirus pandemic, Opel/Vauxhall was able to record a significant annual profit in 2020, its third since General Motors sold the brands to PSA Group in 2017. CEO Michael Lohscheller has discontinued GM's higher-emission legacy models and moved into full electrification with the new Corsa and Mokka. Lohscheller explained the brands' next moves in an interview with Automotive News Europe Associate Publisher and Editor Luca Ciferri, News Editor Peter Sigal and Correspondent Nick Gibbs. 

How was Opel able to make a profit in 2020 despite all the difficulties created by the pandemic? 

It was a very challenging year, obviously, because of COVID-19. Still, it was the third year in a row that Opel achieved an operating profit, of 527 million euros ($627 million), which is a margin of 4.1 percent. What was also important is that we paid out a 500 euro success bonus to all Opel/Vauxhall employees. It was only the second time in the last 30 years that we did that. I would say there are three reasons why we made a profit: First of all, the new Corsa [small car] is a big success. It was the best-selling small car in Germany in 2020, held a top position in the UK, and did very well across Europe. Second, we worked very hard on channel mix, improving sales to private buyers and being less strong in rental, and we also emphasized Motability [the government aided leasing program] in the UK. Third, we did a very good job in terms of overall cost discipline. 

What do you expect for this year, both for Opel and the overall market? 

We were much more optimistic at the end of last year that vaccination programs would work, would be put in place very fast and that the market would recover. But now here we are: After the first quarter of 2021, Germany is in a strong lockdown; the UK was in a lockdown. So it's very difficult to predict, but obviously we do hope that things improve, that vaccinations will be successful. It’s also important to continue to have profitable growth. After the big success of the Corsa last year, the key focus for 2021 will be the Mokka [small SUV]. 

How much is click and collect disrupting potential sales in Germany and the UK ? 

If we compare this lockdown period to the first one we had last spring, it's much, much better. I have visited many dealers this year and they are better prepared in terms of how to do business. We also see it in the absolute sales numbers -- they are doing much better than during the first lockdown. We will see digitalization as a key theme for the distribution side going forward. The most important thing is that the sales journey is efficient and easy for the customers. 

On the distribution side, many automakers are shifting or considering a shift to an agency model. What is Opel's view on this? 

I would say distribution costs are very high in the industry, so I think we have to do something about it. For us, online sales is a key topic. Opel finalized new dealer contracts in 2018 that also allow online sales. So we feel we are well prepared for this. The future will go more in the direction of digital, for sure, but dealers will continue to be crucial partners. 

How many battery-electric models and plug-in hybrids did Opel sell in 2020? And what are your plans for this year? 

Counting plug-in hybrid and pure electric, we had about 35,000 sales, which is around 5.5 percent of all sales – and clearly more than ever before. We have seen this rate increase in January and February. But this is just a starting point.

Did you reach your CO2 target in 2020, and what is the target for this year, when you cannot deduct the 5 percent of high-emissions vehicles?  

PSA as a group was compliant in 2020 and Opel/Vauxhall made a big contribution to that. You might recall that Opel/Vauxhall was actually way behind in terms of CO2. We had very heavy architectures [from GM] that did not allow electrification. We have improved a lot, first with much more efficient internal combustion engines, and we have changed our portfolio pretty dramatically. Some decisions were not so easy, but we did it because I believe that CO2 is really the new currency of the industry. Of course, 2021 is much tougher than 2020 and there will be a further reduction of emissions. Opel will contribute its fair share to the group. 

Does Opel need to address the minicar segment in the future or can you cover those customers by diversifying your small car range? 

In the past, we had the Opel Adam and Karl/Viva [minicars], and the Corsa. Now we have focused everything on the Corsa and this works really well. We have captured a lot of customers with the Corsa, which is our best-selling car. Of course, we always look at trends in the market, and whether an A-segment [minicar] car is interesting to buyers. 

In an interview with another magazine, you said that Opel is taking a close look at the question of mobility in metropolitan areas and that it will be fully electric. Is Opel planning its own version of the Citroen Ami electric quadricycle? 

We will have the benefit of seeing what Citroen learns from the Ami, but it’s too early to say anything specific about our plans. That being said, I think that mobility in urban areas will be pure electric and that customer expectations here are very different. I sometimes feel that car companies have the tendency to over specify things -- and also probably that we Germans over-engineer things. I think breakthrough ideas are very welcome. 

Will a high-riding sedan or a large crossover succeed the Insignia as Opel's flagship? 

It's really important to have a flagship model, because then you have a halo effect that carries over to other car lines. The Insignia is a flagship for the brand at the moment, but body sizes could be different in the future. I don't think it is right just to continue what you have done in the past. Opel has always been very good at adapting. For example, when we launched the Mokka in 2012, we were one of the first small SUVs from a European brand. So, the expectation for my engineering and design teams for a next-generation Insignia is come up with something new. 

Have you already set a date when Opel will stop offering diesels? 

We should turn that question around because we too often start by saying when do we want to ban or stop doing things. Instead, the question should be: What needs to happen so we can accelerate, for example, electrification? The 35,000 electric cars we sold in 2020 are just the beginning. The political framework will push us into much higher volumes of electrification. To do that many, many more things need to happen. If I want to drive an electric car to Italy or Spain, it's a challenge. My concern is that the infrastructure is still not sufficient and sales will not increase as fast as some of us would like. 

The latest manufacturing news is that the DS 4 will be built in Opel’s factory in Ruesselsheim. What are the other Stellantis cross-manufacturing programs involving Opel?

At Luton, England, we produce variants of the Vivaro medium van for Peugeot and Citroen. That was an investment decision we made in 2018 when we saw that light commercial vehicles were growing, even though the outcome of Brexit was still unclear. We also have cross manufacturing in Zaragoza, Spain, where we build the Citroen C3 Aircross as well as the Opel Crossland and Corsa. The new Mokka is built at [a former PSA Group plant in] Poissy, France. The Opel Grandland X is built in Sochaux, France, [also a former PSA factory] and Eisenach, Germany. Last but not least, the Opel Combo small van is being built in Vigo, Spain [with other Peugeot and Citroen vans]. This flexibility is one of the big strengths of our group.

If there was no help forthcoming from the UK government, what would your plan be for the Ellesmere Port factory? 

An investment decision in a factory has implications for up to 10 years in some cases. As we said, we are in very constructive discussions with the British government. We hope to conclude the talks and make sure that all the investment parameters are really clear so that we have transparent information and can make the final decision. If that doesn't happen, then all options would be on the table. 

It's been two and a half years since the PACE turnaround plan for Opel was put in place. What else is left to do on the PACE plan? One of the key points of the plan was to lower the break-even point to 800,000 vehicles. Is that still the goal? 

We made an operating profit of 527 million euros in 2020 at a much reduced volume. If you do the math, our break-even point is much, much lower than 800,000. When I announced in 2017 that we would bring the break-even point below 800,000 some people said we were crazy, that it was too harsh, there was no need. But we saw in 2020 that it was mandatory to do so because otherwise we would have been in the red immediately again, and everybody would have said, 'Oh well, you see, Opel is not sustainably profitable.' What is left in terms of the PACE plan? We are also looking to grow, with cars such as the Mokka and new Astra, and also internationally. We have started commercial activities in markets outside Europe, where we increased our volume last year by about 50 percent [to 55,000 sales]. That shows things are going in the right direction. 

Within Stellantis, Opel is paired with Peugeot in the upper mainstream segment. What are the expectations for synergies within the two brands? 

I feel we have a lot in common in terms of the perception of the cars, in terms of quality and innovation. We will be looking at things we can simplify, in particular on product development. What can we do together? I think one of the key strengths of PSA that helped Opel a lot was the power of benchmarking. I think a lot of people were surprised how quickly we could turn around Opel. One of the main reasons was that we looked at things being done in France and then we said, 'Look. What they can do, we can do just as well, right?' Sometimes I wish governments would do benchmarking in terms of vaccination programs across borders because they would learn very quickly what's working and what's not.

When Carlos Tavares was an executive at Renault, he took the French unions to see Nissan’s plant in Sunderland, England, to show them how they did things there. How beneficial is this?

Plant visits are so helpful because you go down to the assembly level and say, 'Look. That's a good idea from Spain or from the UK or from France or from Poland.' There is so much talent in our factories and sometimes we just have to unleash it. 

Opel wants to expand outside Europe again, but the world looks like a very different place. Things are becoming a lot more compartmentalized. Is there such a thing as a global car anymore? 

I don't think the answer is yes or no. I think in some markets it works very well. In places such as Turkey or North Africa, the European approach works extremely well. European cars also work in pockets of South America. Then you have markets where you have to localize a lot, for example, Russia. And if you don't localize, you have to pay a higher level of duties. 

How important is the brand image when it comes to getting leverage on price against the competition? 

Being a German brand helps in many markets. That can give you a certain level of pricing power, and you can charge somewhat more, which proves the strength of the brand. The other big benefit we have is that we can go into markets where Stellantis is already established and use the infrastructure. We don't have to start from scratch. We are going step by step, market by market. It's not that one market changes the picture completely. But if you do it five, six times, it adds volume and profitability.