GOTHENBURG, Sweden — Opel’s turnaround was accomplished by slashing fixed costs and sharply simplifying its product portfolio, CEO Michael Lohscheller said. But he and his management team employed other levers to get Opel into the black last year.
First, Lohscheller said, he took away the cookies from every meeting. "It’s symbolic, and better for your health," Lohscheller said here at the Automotive News Europe Congress here on Wednesday.
Assuming a more serious tone, Lohscheller said the first move was to cut the ranks of upper management by 25 percent. "You have to clean the escalator from the top," he said, citing a German saying. After doing that, Lohscheller said, "People realized this is serious."
He added that “costs are your best friend” because they are something the company can control. For example, Opel’s product costs per vehicle were down 367 euros (about $410), more than half of the 700-euro reduction under Opel’s PACE turnaround plan announced in November 2017.
Another key driver of the turnaround was quickly moving to PSA architectures from General Motors platforms. Under GM, Opel had nine platforms; under PSA, it will have just two within a few years.
Ten engine families are being reduced to four, Lohscheller said. “That's a massive complexity reduction with huge, huge benefits,” he said.
GM-engineered models such as the Adam minicar are being phased out. Among the PSA-based models to come in the next 18 months are the next-generation Corsa small hatchback, Opel’s perennial best-seller, and Mokka small SUV, another strong seller. Both cars will be available with a battery-electric drivetrain as an option.
Opel’s transformation is also being propelled by benchmarking, both against external competitors and within PSA Group. Lohscheller said he was dismayed at first when he saw how far behind Opel was compared with PSA’s metrics, but it roused the competitive spirit of his team.
"Do not underestimate the power of benchmarking,” he said. "We quickly developed plans on how to catch up. And the Opel people wanted to catch up; they wanted to be better."
Compared with industry benchmarks, Opel pricing has improved by 2.2 percentage points, Lohscheller said — but prices are still 6 percentage points below the target.
"On pricing, we’re still a bit behind," he said, noting that Opel had improved channel mix and trim level.
Although Opel has global ambitions — it will restart sales in Russia at the end of this year — having a Europe-based owner is a key to the turnaround, Lohscheller said.
"What made a big difference was that within PSA, Europe is the core business, and this focus on Europe made a lot of things easier," he said. "In the past, we tried to find global synergies, which sometimes are not so easy to find. 'What are really the synergies between an Opel Corsa in Croatia and a pickup truck in Idaho?'"
"I keep saying, 'Paris is closer than Detroit ever was.' It’s a summary of how we do the business now."
Opel lost nearly 1 billion euros ($1.12 billion) annually under GM over the past two decades but is now profitable under PSA, which bought GM's European business in 2017.
Opel's operating profit in 2018 was 859 million euros $960 million), the highest in its 157 years as a company. The operating margin was 4.7 percent. Free cash flow was 1.36 billion euros. ($1.5 billion). Profits per car increased by 1,400 euros (about $1,550) in Germany, Lohscheller said.
Fixed costs were cut by 27 percent on a like-for-like basis in 2018, said Lohscheller, who was promoted to CEO from Chief Financial Officer in mid-2017, soon after Opel's sale to PSA was announced.
