Analysis: Opel brand identity crisis a self-inflicted wound
FRANKFURT (Reuters) - Carmaker Opel, General Motors' (GM.N) ailing European brand, could use a little ancient wisdom if it wants to reverse the $3.5 billion losses of the last three years: know thyself.
Specifically, know whether your customers really do want to pay extra for the latest driver assistance features or whether dreams of being an upscale marque will chase away your dwindling band of loyal buyers.
"What kind of brand is Opel, and what customer group are we trying to address?" asked Jaap Timmer, European Opel dealers' president and a supervisory board member ahead of a key meeting last Thursday. "First it's supposed to be premium, then it's not premium - we need a clear strategy."
In January 2010, then-Opel Chief Executive Nick Reilly first formulated his plan to move the brand up the value chain as a "leading European manufacturer of high quality, desirable automotive products, based on German Engineering", competing head to head with rival Volkswagen (VOWG_p.DE).
Opel churned out cars that steadily became every bit as good as Volkswagen's in many cases, but its brand image did not keep pace. Company insiders voiced frustration that people still "have to explain themselves" when buying an Opel.
The results were devastating. In Germany, its single largest market, Opel's share slid to a record low of 7 percent in the first four months of 2012 - a third the size of the Volkswagen (VOWG_p.DE) brand and easily trailing luxury names BMW (BMWG.DE), Mercedes-Benz (DAIGn.DE) and Audi.
With Europe's car market shrinking 20 percent since a peak in 2007 before the financial crisis struck, the strategy was at best ill-timed. Opel's acute crisis and heavy losses became such a top priority for Detroit that headquarters dispatched Vice Chairman Stephen Girsky to Germany to oversee Opel's overhaul personally.
A new 10-point turnaround plan broadly centres on reducing overcapacity, investing in new models and powertrains, lowering material costs as well as extracting savings through an alliance with French rival Peugeot (PEUP.PA).
Yet apart from management's intent to close a German factory in Bochum at the start of 2017 and vague ideas of shifting some Chevrolet production to underutilized plants in Europe, few concrete details have been revealed.
The purpose of Opel's move upmarket was to better differentiate it from Chevrolet, which GM global marketing chief Joel Ewanick wanted to compete with rival value brands, something Opel was less well placed to do, with almost all its assembly line workers employed in high-wage western Europe.
Former Opel labor leader Klaus Franz was critical of Ewanick's plans at the time. He feared the brand would lose its existing more price-conscious customer base. Going upscale was the "Saab-isation" of Opel, Franz declared, in reference to GM's Swedish premium marque, which died a slow death.
Timmer, too, believes Opel should orient itself more in line with Volkswagen's Skoda brand, which is aimed at cost-sensitive buyers, than the premium VW brand itself.
"I think that might have been a mistake by Reilly," he said.
It's a sentiment shared by many at Opel who worry that GM's borderline resentment of its unit's troubles is rubbing off on car buyers, making them less likely to reach deeper into their pockets for a Zafira Tourer MPV with an expensive trim package.
"Consumers feel much more comfortable spending 40,000 euros of their hard-earned money on a well-equipped family van if it has a good image and stands for success, not for an Opel," complained one manager who asked not to be named.
Opel Chief Executive Karl-Friedrich Stracke signalled to industry insiders in Monaco recently he might reverse course.
"We moved up too quickly in the ranks," he told an Automotive News Europe conference, "and we lost some of our affordable customers with our pricing philosophy. That's what we have to go back to with our content and prices in the future."
Stracke wants Opel to focus on "traditional and attainable potential customers" as part of midterm business plan he presented to his board last Thursday.
"Attainable sounds to me like a euphemism for value-oriented and not premium," says Metzler Bank analyst Juergen Pieper. "If you're analysing it realistically, though, it's the right conclusion, since it would be an illusion to think that Opel could position itself as premium among mass-market brands over the next 10 years."
GM's gambit of pushing unions into wage concessions by playing one plant off against the other in the media or openly wavering in its commitment to Opel has also lost it customers, says Ferdinand Dudenhoeffer, head of the Center Automotive Research (CAR) in Duisburg.
In the wake of emerging from bankruptcy in the United States in 2009, GM was poised to sell Opel. But in November that year GM's board of directors overruled management and reversed that decision, deciding to keep Opel. Doubts about Opel's long-term future linger among German consumers, however.
"Someone who is uncertain about the future of a brand won't buy a car from that company," explained Dudenhoeffer. "GM and Opel have themselves to blame."
Despite its woes, Opel has enjoyed some critical successes. It has won the European Car of the Year award twice in the last four years, once for the Opel Ampera electric car, which sells for 43,900 euros and is known as the Chevrolet Volt in the U.S. Dudenhoeffer believes Opel is three years ahead of Volkswagen with the Ampera.
What's more, Opel's engineers have focused on improving their cars' interiors through more luxurious seats, such as the orthopaedic-certified AGR seats offered in the Astra for example.
Yet Opel's image cost it thousands in lost revenue per car. While Volkswagen can sell a basic 1.4 litre four-door Golf hatchback starting at 17,760 euros in Germany, a comparable Opel Astra can already be had for just under 15,000 euros.
"Long-term success is not possible without a strong brand," said Bernd Buechner, the head of Millward Brown in Germany, an agency that annually ranks global brands. "But Opel is fighting with problems on all fronts, and consumer confidence in the brand is severely damaged."
Rehabilitating Opel's image is "absolutely crucial", acknowledges Johan Willems, a member of Stracke's senior management team responsible for communications.
"The brand itself needs a lot of attention at the moment, especially in Germany," he adds. "Our leadership team is working hard and putting a lot of emphasis on this. Nothing is more important."
Millward Brown's Buechner thinks all is not lost. He believes the extended-range Ampera could produce a halo effect for Opel, as the Volt is doing for Chevy in America.
"There are brands that were able to reverse their poor image. Just think of Audi and Skoda, or Jaegermeister (liqueur)outside of the auto industry. The Ampera can be the crystallisation point of a successful turnaround for Opel with the right marketing strategy," he said.
(Reporting by Christiaan Hetzner; Editing by Will Waterman)