Is GM Europe really on the brink?

"505 - morphine not found" (morphine500) 08/08/2013 at 13:01 • Filed to: None

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This is an issue, that's been discussed here and on the FP quite a few times now, but there's something i read the other day, that might make sense, but would also shed bad light on the whole situation, so i am looking for your thoughts and insights on this. Here's a token Ascona 400 for your troubles.

So we all know, that with the European market ailing, and with Opel/Vauhxall landlocked here, the European division of GM has been in the red for a decade or so now. This despite the fact, that even though not my cup of tea, their cars stand the comparison with others of the respective segments, and despite the fact, that these cars get sold on other continents too - not least the lucrative USDM, as Buicks. People on here and on the FP talked about simply shuttering the whole operation, but as others, and me too pointed out, a lot of GM development goes on at the Opel HQ - not just the badge-engineer Buicks, but also modern, small-displacement engines for Chevy, etc.

This didn't really add up to me. Why would GM even think about shuttering their think-tank? Why isn't an operation supplying cars for several markets cheaply re-badged, and engines for even more cars turn a profit? If small-scale Mazda can be profitable, why not GM Europe? I have to say, something didn't add up, but i didn't know, what. Even less logical, for me at least, seemed the push from GM Europe, that they want these cars to be sold as Opel overseas, which would solve their problems. Why would developing and upkeeping an importer and dealer network on a new market be cheaper, than simply giving your car to a marquee already present there?

Then i read in a news piece the other day, that GM accounting writes the profit on these rebadged cars to the division selling it and not to the division making it.

Get it? GM Europe designs a car, tools a factory, schools the workers, which are all very expensive, but then Buick keeps the returns when the car gets sold. If I understand this correctly, GM writes up almost all high-cost operations on these cars to GM Europe, but then writes almost all the returns to the marquee selling the product. (Remember, its not just Buick, lots of Chevy cars use GM Europe engines, maybe even Cadillac). In effect they keep the "bastard child" in the red, so that the "spoiled children" under the closer inspection of american investors and politicians can keep in the black.

I know very little about global corporation-scale accounting, and even less about GM internals, but this sounds feasible to me, and also smells foul. You have a company that's fighting tooth and nails, and i have to give it to them even though i don't like Opels the new cars are pretty competent, and also look good, while not too expensive, so they do in deed put up a fight. And still, if i understand this correctly, GM keeps them in the red, artificially.

Can anyone here tell me if my assumptions and logic is sound?

Goshen, formerly Darkcode > 505 - morphine not found 08/08/2013 at 13:06

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Basically, GM-E isn't working properly because GM brands are still too independent financewise.

Mikeado > 505 - morphine not found 08/08/2013 at 13:32

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This thought combined with Klaus's point that Opel/Vauxhall haven't made anything original or remotely trend-setting car since the Zafira, would explain a lot.

Mind you, while the Chevy Cruze has been doing well and the Insignia is also the Buick Regal, I'm pretty sure the majority of VauxOpel's work ends up in VauxOpel's cars. Although, Holden uses a couple of their models as well, and of course Opel is Chevrolet in places like Spain for some reason... so maybe you're right.

Aren't GM-Europe also working on hydrogen cars (there was an Opel hydrogen SUV at a couple of car shows), or is that research twinned with US research?

505 - morphine not found > Goshen, formerly Darkcode 08/08/2013 at 13:35

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But if that would be the case, Buick would have to pay for the cars, and Chevy for the engines. I seriously doubt this is the case, as that would mean GM-E being much less in the shit, if at all.

505 - morphine not found > Mikeado 08/08/2013 at 13:40

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I wouldn't agree re: where their work ends up. I would wager that most anything under 3.0 liters in a GM product is their work nowadays, especially if it's diesel, and both the astra and the insignia are sold as buicks, while Chevy shares the underpinnings with these and the even smaller cars with them. There are lot of models that are available both in Chevy and Opel versions internationally, and there are others that aren't the same but use the same platform and share engine. Cruze is a good example. And a lot of this is developed at GM-E

Packardbaker > 505 - morphine not found 08/08/2013 at 20:15

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My first thought would be taxes. If Europe's corporate taxes are higher (I know their personal income tax is) you would want to show a loss there and move all the profits to places where taxes are lower.