Opel driving to corner sales in Europe GM officials looking to learn from subsidiary's success

March 15, 1992|By Ian Johnson | Ian Johnson,Contributing Writer

Berlin -- As the first full year of German unification began in 1991, Volkswagen boss Carl Hahn said he wanted his company to dominate the booming eastern car market as it had the rest of Europe.

But, in a move that surprised most analysts, giant VW was passed by Adam Opel AG, General Motors Corp.'s German subsidiary, which had a reputation as a frumpy, workmanlike runner-up.

Through clever marketing and imaginative sales techniques, Opel snatched 18 percent of the car-hungry eastern German market, while VW was left with 13 percent -- almost 7 percentage points less than its market share in western Germany.

That performance helped Opel post record revenues of $17 billion and estimated net profits of $1.75 billion in 1991.

Now, as GM executives in the United States contemplate how they can staunch their multibillion-dollar losses and battle Japanese competitors, they are looking at Opel and wondering whether they can learn something from their German cousin, which has become one of Europe's most dynamic automakers after years of stagnation and losses.

What they may find, however, is not quite as straightforward as Opel's flashy financial results suggest. Opel has certain lessons for GM. Still, it operates in protected markets that GM might envy but cannot duplicate.

An important reason for Opel's success, says Hans-Joachim Frank, an auto industry analyst for the Deutsche Bank, is its improved quality and market research, which has led the company to develop a complete range of popular models, such as the Kadett, Vectra and Calibra, as well as the new Astra.

"Opel seem to understand the European customer better than GM understands the American customer," Mr. Frank said.

The company also has worked hard to boost its image. Opel once had a reputation for selling conservative sedans to men who, the joke went, still wore hats while driving.

An aggressive marketing campaign now portrays Opel as a maker of solid and safe, but sporty, cars. The aerodynamic Kadett, introduced in 1982 under the guidance of Robert C. Stempel, former Opel chairman and current GM chairman, helped build the new image. After four straight years of losses, the company turned a profit in 1987 thanks to the Kadett.

"Since then, Opel has moved from strength to strength. Their models look modern and they have a wide variety," said Arthur Maher, an industry analyst with DRI Consulting in London.

Mr. Maher has tracked Opel's success in Britain. Opel, which sells under the Vauxhall name there, once languished behind the Rover Group and Ford Europe. Today, it is challenging Ford Europe for dominance in Britain -- the most recent monthly sales figures show the two in a dead heat.

In eastern Germany, Opel jumped ahead of VW through innovative sales techniques and an imaginative advertising blitz.

While VW banked on its name recognition and cooperation with the former communist automobile sales network, Opel hired a private sales force operating with higher commissions. A traveling road show complete with free beer, sausage and a six-piece brass band boosted Opel's recognition -- and sparked more than 6,000 sales.

And Opel made use of the region's nascent mass media advertising by buying the first national television spots broadcast in eastern Germany.

Opel also used the new opportunities in eastern Germany to build a new factory, which will be one of Europe's most modern and "leanest" factories.

Still, Opel -- like other European companies -- might not be able to innovate widely in its factories. Local transportation systems, already stretched to capacity, might not be able to support "just in time" delivery of parts to the assembly line, as required by modern production methods.

Opel faces other problems in maintaining its success.

Opel has been trying to cut costs and move into the Eastern European market through agreements to assemble its new Astra in Poland and Hungary. Friday, the first Astra rolled off the assembly line in Szentgotthard, Hungary, where GM has invested about $200 million in a joint venture.

But analysts see another problem: Opel's lack of freedom from GM's crushing losses.

Mr. Frank, for example, said some Opel managers have complained to him privately that their capital expenditures are limited because they are part of a sick organization. Figures for 1991 are not available, but Mr. Frank estimated that in 1990 Opel sent $1.1 billion to GM, money that managers feel is needed to strengthen Opel.

VW, by contrast, is moving more aggressively in Eastern Europe and is better positioned for expansion when the region's consumers have more money in their pockets. VW's Golf, which directly competes with Opel's Astra, also has been better received by the German automotive press, thanks to superior engineering.

And Opel faces increased competition from Japanese automakers.

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