Opel Presses Forward With Changes

FRANKFURT, Germany September 12 2003; David Mchugh, writing for the AP reported that Adam Opel AG, the German arm of General Motors Corp., says it's weighed down by the weak German economy as its revamped top compact enters the fray against heavy competition and the company seeks to return to profitability.

"I would call it frustrating, slow-moving," Opel chief executive Carl-Peter Forster said about consumers' reluctance to spend -- particularly in Germany, Opel's home market.

Opel has tried to shed a stodgy image with a five-year drive begun in 2001 to modernize its cars and recover from a disastrous slide of the late 1990s. Big hopes are riding on its restyled Astra five-door compact rolled out this week at the Frankfurt International Auto Show, and several other reworked models are in the pipeline.

"We are at halftime," said Forster, a former BMW executive brought in to turn Opel around. "We need to finish the drive."

That means sustained, strong profitability over several years, not just reaching Opel's goal of turning a profit next year, Forster said at a discussion with reporters this week.

"We define turnaround as making decent money in Europe, and we're not yet doing that."

Opel has put more daring styling into its mass-market offerings, including a new Tigra two-seat convertible and a sportier, three-door version of the Astra, both due next year. Engines will include diesels have been a hit with European consumers for their good mileage and zippy performance, a benefit from GM's engine-making joint venture with Fiat.

But the economy is not cooperating -- especially in Opel's home base of Germany, its biggest market where it sells nearly a quarter of its annual 1.5 million vehicles.

The stakes are high not just at Opel's sprawling headquarters at Ruesselsheim outside Frankfurt.

During the 1980s, Opel contributed hundred of millions to parent GM's earnings, then let styling and quality lag and became a deadweight, losing euro502 million in 2001. Opel, which lost euro345 million last year, hopes to turn a full-year profit next year.

New cars on display at the Frankfurt show underline Opel's push.

The new Astra underwent a more noticeable makeover than its competitor, Volkswagen's Golf, getting eye-catching bigger headlights and an emphatic grille, and growing by five inches. Its Meriva small van has given Opel an entry in a popular category in Europe.

Opel's efforts appear to be helping with consumers. Market share is up slightly, to 8.95 percent in Western Europe from 8.72 percent a year ago, leaving the company at No. 3 behind Renault and Volkswagen. Surveys by the German magazine Auto, Motor und Sport show improving consumer perception on workmanship and styling.

Forster and Mike Burns, the head of GM Europe which includes Opel and Saab, says the company will have to get back on its feet without counting on a boost from stronger demand.

European automakers have discounted to keep sales from falling further, though not to the extent that U.S. manufacturers have.

Forster complained about Germany's yearlong debate over economic reforms, including constantly changing proposals to cut generous health and pension benefits, which he said have consumers on edge.

Chancellor Gerhard Schroeder has proposed changes hoping to pull the economy out of a three-year stagnation.

But consumers don't know "how much money is available in future years for a major purchase such as an automobile," Forster said.

"The consumer has completely lost his overview, doesn't know what is going on, and has shrunk his committments."