How benchmarking helped Opel to rebound
PSA CEO Tavares, left, and Lohscheller, right, have returned Opel to profit.
Being able to benchmark against new owners PSA Group was a key advantage to help Opel/Vauxhall cut costs and reverse losses under years of General Motors ownership, Opel CEO Michael Lohscheller said.
Opel reported a first-half operating profit of 502 million euros ($ 587 million) and achieved a 5 percent margin in a remarkable turnaround under PSA ownership.
“If you can compare and benchmark it’s very meaningful and very powerful,” Lohscheller told Automotive News Europe. He said this wasn’t anywhere near as effective under GM.
“It’s much more powerful within one region than on a global basis. Comparing Europe with China or the US is quite difficult,” Lohscheller said.
PSA said that Opel delivered 28 percent reduction in fixed costs. “A 28 percent reduction is enormous,” Lohscheller said.
The biggest area of savings came from manufacturing. Opel has “compressed” assembly plants to make them more compact to save in areas such as logistics and has reduced complexity, Lohscheller said.
For example at Ellesmere Port in northwest England, Opel cut staff by around a third to cut production of the Astra and Astra Tourer compact models to a single shift. The plant was benchmarked against PSA’s flagship plant in Sochaux, France and was found to be building cars at twice the cost, Opel’s sister brand Vauxhall in the UK has previously said.
PSA is cutting Opel’s headcount in Germany by 3,700 to save costs. PSA CEO Carlos Tavares repeated his promise at the company’s first-half earnings call on July 24 that job cuts will be voluntary.
Lohscheller said Opel had cut the numbers of “top management” by 25 percent to emphasize this was a “top down” cost restructure.
Also contributing to Opel’s half-year profits were improved pricing and model mix for the new Crossland X and Grandland X SUVs. Variable costs per model had come down, Lohscheller said.
Opel’s performance came despite a significant fall sales of Vauxhall cars in the UK, the automaker’s second-largest market after Germany. Vauxhall sales in Britain fell 13 percent in the first six months, ousting the brand from its traditional second place behind leader Ford and putting it third behind Volkswagen brand. The UK market has been hit by plunging sale sof diesel cars and uncertainty over Brexit.
Lohscheller said the poor UK sales performance hadn’t had a big impact on profits. The UK “is in our positive numbers, and that’s a good reflection of where our business stands at the moment,” he said.
Vauxhall had stopped chasing low margin sales such as daily rental. “We are focused a lot of quality of the sales,” he said.
Lohscheller described Opel’s half-year financial results as delivering a “very clean margin” that was repeatable. He said “every single model” was profitable for the brand.
PSA separated 406 million euros of Opel restructuring expenses from the half-year figures. PSA chief financial officer Jean-Baptiste de Chatillon said on the earnings calls these were “mainly linked” to the agreement signed between Opel Vauxhall and the Opel and IG Metall union Works Council at the end of May.
You can reach Nick Gibbs at email@example.com.
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