How Opel Was Sucked Dry by GM
The industrial millipede General Motors has only one healthy leg left and that’s Opel. Despite that, the German firm stands with its back to the wall. An anonymous insider details how the U.S. parent company General Motors systematically sucked Opel dry.
You know what? I get really mad at how General Motors hollowed us out, plundered us, sucked us dry. How they fed us their bullshit just to get their hands on our patents. Bullshit is the only word for it. One day, a bunch of GM people arrived here from Detroit and said, “OK, we want all your inventions, all your patents and all your know-how and we want it all right now, and in a generous quid-pro-quo, we’re going to give you GM bonds.”
Now our patents belong to General Motors and for every car Opel builds we have to pay them a fee. Need I mention that Opel never received a single cent for its patents from General Motors? The same goes for Opel’s engineering plans. Dimensions, tolerances, materials, the entire range of blueprints. That’s more important than patents because they cost a fortune to develop. GM took them all for free and now they use them for their other brand names and in countless models all over the world.
Using Opel’s engineering plans, GM now builds a Buick, a Chevrolet, a Pontiac, and in Australia a Holden. A Chinese subsidiary is preparing to produce its own brand. All with our engineering and all using our know-how.
It will be exactly the same with the new Astra, due to be on the market this fall. How do you like that? They’re sucking us dry, they’re lunching on our guts. Last year alone, Opel had to pay General Motors 650 million Euros (currently about $830 million), and for what? For patent license fees on our own patents. General Motors has a strategic plan. They figure out which engines and which body styles will be needed over the next five years. Then it’s all parceled out globally: this will be built in Rüsselsheim, that in Detroit and those go to Asia.
With the little Opel Agila, for example, this is how it went: GM said you can’t build the Agila in Rüsselsheim, that’s not economical; labor costs too high, production numbers too low. You’ll build it in cooperation with somebody else, namely, with Suzuki. And why Suzuki? Because GM owned 20 percent of Suzuki at the time the decision was made. That turned out to be a foolish decision, both technically and economically. But that was GM’s decision. Ours was not to wonder why; ours was just to shut up, even though we knew we could build a better car for less money, with a partner of our choice closer to our own borders. Peugeot or Renault, for example.
In 1992, globalization fever hit General Motors. Shortly thereafter, management consultants fanned out from Detroit across the General Motors global dynasty. They did a study to determine which research and development center was most competitive. It was a quick study: Opel in Rüsselsheim won hands down. Our R&D center was designated the international research and development center and was told it would be responsible for everything. Everything globally, Korea included. But excluding the United States, for which GM retained its own R&D. This division never functioned properly, but in GM’s view, it was a brilliant decision.
Korean clutch problems on the Opel Antara
In Germany, the Chevrolet Captiva is known as the Opel Antara, but it’s built in Korea. Soon after the onset of production, the Antara had to be recalled. Why? The Korean jalopy had problems because the Koreans didn’t really understand the clutch design. We had to solve that one for them, a last-minute emergency just to make the thing sellable. Then, GM put up factories in China and Korea to make copies of our engines and cars over there.
And we’re supposed to make it all happen. Now try to imagine a telephone conference with Koreans, Americans and us. There’s a collection of characters. The Americans had no concept of reality. It made me sick to listen to their questions. Measurement techniques! Basic concepts! What is it to us if GM can’t get their Asian factories running right? Well, it cost Opel a bundle! But the worst part was that GM ordered Daewoo personnel be given free access to everything at Opel. GM told us to give Daewoo anything it wanted. We were outraged.
With the passage of time, I’m now able to recall all that more calmly. Even with blueprints in hand, the know-how can’t just be copied. The new models Insignia and the reworked Astra – both are masterpieces from the technical point of view. They can be built simultaneously on the same production line. Think about that for a moment – two automobiles, basically very different, much different in size – but they both roll off the same assembly line. We could even produce them simultaneously with other GM products in the United States. The same is true of the minivans Zafira and Meriva. We’re faster, more flexible and more economical with those models. There are very few manufacturers technically capable of doing that. From the point of view of the model palette and the technology, Opel is in a class by itself. We’ve never been better or more economical than we are now.
GM forces the wrong model policies on us
Opel currently has an eight percent market share – not good enough. For years, GM forced Opel to make the wrong models. But worst of all, poor quality control took us down. It was a horror story. We were ashamed. Terrible. One day, more people from GM came to visit and they showed us what they understood about quality control. We pointed out the rusty longitudinal frame members on the Astra. They replied, “So what? It runs, doesn’t it?” German management could only clench their fists in private. Brand new Astras with rusty frame members, all for lack of a few cents worth of rust-proofing! Complete idiocy. We shouldn’t have swallowed that. None of us should have. But try starting a revolution against the highest corporate bosses. Nobody does that, and we didn’t either.
The same quality problem popped up at Volkswagen shortly after it did at Opel, and both instances were due to the same source – Ignacio Lopez. Under fly-by-night circumstances, Lopez left Opel and was hired by Volkswagen. It wasn’t long before they, too, were going downhill, but Volkswagen was able to muddle through without their image being overly tarnished and without their market share collapsing. From 1994, Opel really began hitting the skids: lousy quality and a lousy image. The symbol for that was the Omega B. Merciless, crystal-clear public feedback was there, but what did GM do about it? They took six years deciding and by that time they woke up to realize they had driven Opel to the brink of ruin.
Those days are now Opel’s trauma. Nobody can imagine what panic Opel goes into because of the smallest defect. We test forward and backward ad nauseam. I find that paranoid and think they’ve gone overboard. But then you should know just how small the automobile world really is. We all know one another and it’s pleasant hearing colleagues from Audi telling us over a beer that they just finished taking our Astra down to its bare bones in their Ingolstadt factory. And we ask them, “So, what do you think?” Their answer: “Wow! Really extra-class quality. How do you do it for the price?”
The long-distance tests done by the automotive magazines are also fantastic. The magazine AutoBild summed it up neatly by using an advertising tag from Opel’s past: “Opel, the reliable.” We’ve done better than Volkswagen on that score, and several of our models have now reached Toyota’s standards. When it comes to finish, on the other hand, VW is still ahead for first impressions and interior materials. I’m constantly amazed at the love of detail evident in their products. But GM stabbed us in the back there as well.
GM denies us the opportunity to invest in our own products because they need the money to recapitalize their own business. In spite of all that, I must admit that GM’s R&D is top-notch. To me, the thought of Opel being controlled by China or India is nothing short of a nightmare because we would lose our connection to technology. GM is also great at production know-how and process technology. In 1963, for example, they invented the divided connecting rod. They’re excellent in those areas and we also profit from that because we can’t afford an R&D operation to match Daimler or Volkswagen.
GM doesn’t understand the European automobile market
So Opel has been paying GM an annual development fee for technical innovations – and that’s a good thing. GM has sunk billions upon billions of dollars into new technology. They already had future technology ready for their production models, but GM boss Rick Wagoner didn’t want to do that. He wanted to stick with primitive trucks. He slept through the fuel price increases and, above all, he neglected to start putting the latest technology into production. Now he says GM will soon have a super-modern, super-economical turbo diesel in their lineup. It will incorporate the latest downsizing technology, and will have all kinds of performance, power and torque – all from just 1.4 liters displacement (about 85 cubic inches).
That engine could replace a six-cylinder gasoline model. Where did Wagoner get such a marvelous thing so quickly? He got it from us. That’s what Opel is so good at. The engine in the Smart, for example, was copied directly from an Opel engine. Opel’s masterpiece, the 1.8 liter engine, is considered by Daimler, BMW and even Porsche to be a benchmark achievement. And the costs! If I told you how inexpensive our fantastic three-cylinder engine is to manufacture, you wouldn’t believe me. When it comes to economy cars, nobody in the world can show us up, not VW and not even Toyota. We’re their equal on that playing field.
General Motors doesn’t understand the European auto market nor will they ever catch on. They laugh themselves to death when they hear that an Opel Astra costs 25,000 Euros. For that kind of money in the United States, they can get a crate 50 percent bigger with a Bose super sound system, air conditioning, and all the bells and whistles. That’s why they don’t think much of European quality standards. American cars have crappy suspension systems, garbage-dump brakes and unrefined engines. A little three-cylinder Opel Corsa will run wide open up and down the Autobahn between Hamburg and Munich for days on end. For an American engine, that would be a death sentence.
The best thing for us (that is to say, for us engineers) would be a partnership with Daimler or BMW. Neither possesses much in the way of economy car expertise. O.K., BMW has the Mini, but they barely break even on it and selling 150,000 of them a year won’t help, either. That’s why our European boss Forster paid BMW a visit a few months ago. They were looking at the possibility of a common platform for Opel and the Mini. The deal fell through because of minor details. Forster now says he would have handled discussions a bit differently had he known then what he knows now. And, he added, BMW would have come out better had they done the same.
If Opel has its back to the wall, the dominoes will start to fall
They have every reason to do so. BMW is approximately the same size as Opel and has many of the same problems, it’s just that they’ve only now started noticing that. The BMW 1-series is selling well at the moment but is only marginal, quality-wise. Mainly, it has a cost problem. Production figures are too low and the Bavarian firm can no longer afford its high-tech features. In cooperation with Opel, that would change. Technically and qualitatively we speak the same language. Most of the engineers at Opel and BMW already know one another personally.
And then there’s Daimler. In building the Smart or the A-Class Mercedes, it’s obvious across the industry that they lack the know-how to build them profitably. I’m not being conceited. I admit openly that if Opel wanted to build a high-end limousine like the Mercedes S-Class, it would take three or four model generations before we could offer a first-class product. Daimler and BMW are simply way out front in that area. But when it comes to small cars, they’re still in the learning stage. Opel and Volkswagen are really the only European companies that have the knowledge, experience and quality-consciousness needed for that.
I have no crystal ball insight into high-level financial strategy. I can’t predict that Opel will be able to repay all its loans within two or three years. But I am certain we shouldn’t postpone the new Meriva. This car will bring in the cash and plenty of it. We wanted to bring it out in January 2011, but those plans had to be shelved. GM even wanted us to delay our cash-cow, the new Astra, for a whole year. Fortunately, Forster was able to convince them to change their minds on that. It’s now scheduled for introduction this fall.
If everything is so great, then why does Opel want a government-guaranteed loan? Because there’s no automobile manufacturer that doesn’t run on loans. Before production can even begin, Opel already has huge bills to pay to suppliers. They, in turn, need that money to pay for their production facilities. That’s the reason we need the loans. It’s not about losses or current operations. They’re running extra shifts in the Corsa factories, the Insignia is already a huge success with a backlog of 75,000 orders and the new Astra has the stuff to overtake the VW Golf in sales. Meriva and Zafira are bestsellers. The outlook couldn’t be any brighter.
If the German government lets Opel go bankrupt, a whole row of dominoes will topple. Who is aware that in every car in the world there are at least 60 parts provided by the Schaeffler company? (Trans. Note: Schaeffler is a major producer of automotive and aeronautical roller bearings). They’re used in Toyotas and all the vehicles produced in India as well. If Opel’s production of 1.4 million vehicles is lost, it could well be the death-knell for Schaeffler. And what would that mean?
Opel wouldn’t be the only one to feel the effects of that. Such a blow would tear a gaping hole in the entire fabric of German parts manufacturing. Volkswagen, Daimler, BMW, and Ford – everybody would suffer. Here’s an absurd theoretical example: let’s assume Bosch goes broke. Nobody would be able to build cars. If any supplier is teetering on the edge and Opel, with its 8 to 10-percent market share goes down, then it’s curtains for Bosch. There’s not a single CEO in the automotive branch that would disagree with that.
I spent a lot of time in the United States and I know pretty well how GM is organized. I have a great deal of respect for their technicians and engineers, but GM’s management isn’t worth discussing. Those are the people who plundered Opel and forced their model policies on us along with their concepts of quality and what a European bestseller should look like. But did we at Opel also make mistakes?
We certainly did. We failed to stage a palace revolution in 2004 when 9,000 workers had to be laid off. That’s when we should have said, “If Opel has to sacrifice 9,000 people because General Motors drove us into a ditch, we’re not going to stand for it. From here on, nobody dictates to us what the European market needs or doesn’t need. From here on, we’ll decide that.” That’s what we should have said back then.
But we didn’t.
You know what? I get really mad at how General Motors hollowed us out, plundered us, sucked us dry. How they fed us their bullshit just to get their hands on our patents. Bullshit is the only word for it. One day, a bunch of GM people arrived here from Detroit and said, “OK, we want all your inventions, all your patents and all your know-how and we want it all right now, and in a generous quid-pro-quo, we’re going to give you GM bonds.”
Now our patents belong to General Motors and for every car Opel builds we have to pay them a fee. Need I mention that Opel never received a single cent for its patents from General Motors? The same goes for Opel’s engineering plans. Dimensions, tolerances, materials, the entire range of blueprints. That’s more important than patents because they cost a fortune to develop. GM took them all for free and now they use them for their other brand names and in countless models all over the world.
Using Opel’s engineering plans, GM now builds a Buick, a Chevrolet, a Pontiac, and in Australia a Holden. A Chinese subsidiary is preparing to produce its own brand. All with our engineering and all using our know-how.
It will be exactly the same with the new Astra, due to be on the market this fall. How do you like that? They’re sucking us dry, they’re lunching on our guts. Last year alone, Opel had to pay General Motors 650 million Euros (currently about $830 million), and for what? For patent license fees on our own patents. General Motors has a strategic plan. They figure out which engines and which body styles will be needed over the next five years. Then it’s all parceled out globally: this will be built in Rüsselsheim, that in Detroit and those go to Asia.
With the little Opel Agila, for example, this is how it went: GM said you can’t build the Agila in Rüsselsheim, that’s not economical; labor costs too high, production numbers too low. You’ll build it in cooperation with somebody else, namely, with Suzuki. And why Suzuki? Because GM owned 20 percent of Suzuki at the time the decision was made. That turned out to be a foolish decision, both technically and economically. But that was GM’s decision. Ours was not to wonder why; ours was just to shut up, even though we knew we could build a better car for less money, with a partner of our choice closer to our own borders. Peugeot or Renault, for example.
In 1992, globalization fever hit General Motors. Shortly thereafter, management consultants fanned out from Detroit across the General Motors global dynasty. They did a study to determine which research and development center was most competitive. It was a quick study: Opel in Rüsselsheim won hands down. Our R&D center was designated the international research and development center and was told it would be responsible for everything. Everything globally, Korea included. But excluding the United States, for which GM retained its own R&D. This division never functioned properly, but in GM’s view, it was a brilliant decision.
Korean clutch problems on the Opel Antara
In Germany, the Chevrolet Captiva is known as the Opel Antara, but it’s built in Korea. Soon after the onset of production, the Antara had to be recalled. Why? The Korean jalopy had problems because the Koreans didn’t really understand the clutch design. We had to solve that one for them, a last-minute emergency just to make the thing sellable. Then, GM put up factories in China and Korea to make copies of our engines and cars over there.
And we’re supposed to make it all happen. Now try to imagine a telephone conference with Koreans, Americans and us. There’s a collection of characters. The Americans had no concept of reality. It made me sick to listen to their questions. Measurement techniques! Basic concepts! What is it to us if GM can’t get their Asian factories running right? Well, it cost Opel a bundle! But the worst part was that GM ordered Daewoo personnel be given free access to everything at Opel. GM told us to give Daewoo anything it wanted. We were outraged.
With the passage of time, I’m now able to recall all that more calmly. Even with blueprints in hand, the know-how can’t just be copied. The new models Insignia and the reworked Astra – both are masterpieces from the technical point of view. They can be built simultaneously on the same production line. Think about that for a moment – two automobiles, basically very different, much different in size – but they both roll off the same assembly line. We could even produce them simultaneously with other GM products in the United States. The same is true of the minivans Zafira and Meriva. We’re faster, more flexible and more economical with those models. There are very few manufacturers technically capable of doing that. From the point of view of the model palette and the technology, Opel is in a class by itself. We’ve never been better or more economical than we are now.
GM forces the wrong model policies on us
Opel currently has an eight percent market share – not good enough. For years, GM forced Opel to make the wrong models. But worst of all, poor quality control took us down. It was a horror story. We were ashamed. Terrible. One day, more people from GM came to visit and they showed us what they understood about quality control. We pointed out the rusty longitudinal frame members on the Astra. They replied, “So what? It runs, doesn’t it?” German management could only clench their fists in private. Brand new Astras with rusty frame members, all for lack of a few cents worth of rust-proofing! Complete idiocy. We shouldn’t have swallowed that. None of us should have. But try starting a revolution against the highest corporate bosses. Nobody does that, and we didn’t either.
The same quality problem popped up at Volkswagen shortly after it did at Opel, and both instances were due to the same source – Ignacio Lopez. Under fly-by-night circumstances, Lopez left Opel and was hired by Volkswagen. It wasn’t long before they, too, were going downhill, but Volkswagen was able to muddle through without their image being overly tarnished and without their market share collapsing. From 1994, Opel really began hitting the skids: lousy quality and a lousy image. The symbol for that was the Omega B. Merciless, crystal-clear public feedback was there, but what did GM do about it? They took six years deciding and by that time they woke up to realize they had driven Opel to the brink of ruin.
Those days are now Opel’s trauma. Nobody can imagine what panic Opel goes into because of the smallest defect. We test forward and backward ad nauseam. I find that paranoid and think they’ve gone overboard. But then you should know just how small the automobile world really is. We all know one another and it’s pleasant hearing colleagues from Audi telling us over a beer that they just finished taking our Astra down to its bare bones in their Ingolstadt factory. And we ask them, “So, what do you think?” Their answer: “Wow! Really extra-class quality. How do you do it for the price?”
The long-distance tests done by the automotive magazines are also fantastic. The magazine AutoBild summed it up neatly by using an advertising tag from Opel’s past: “Opel, the reliable.” We’ve done better than Volkswagen on that score, and several of our models have now reached Toyota’s standards. When it comes to finish, on the other hand, VW is still ahead for first impressions and interior materials. I’m constantly amazed at the love of detail evident in their products. But GM stabbed us in the back there as well.
GM denies us the opportunity to invest in our own products because they need the money to recapitalize their own business. In spite of all that, I must admit that GM’s R&D is top-notch. To me, the thought of Opel being controlled by China or India is nothing short of a nightmare because we would lose our connection to technology. GM is also great at production know-how and process technology. In 1963, for example, they invented the divided connecting rod. They’re excellent in those areas and we also profit from that because we can’t afford an R&D operation to match Daimler or Volkswagen.
GM doesn’t understand the European automobile market
So Opel has been paying GM an annual development fee for technical innovations – and that’s a good thing. GM has sunk billions upon billions of dollars into new technology. They already had future technology ready for their production models, but GM boss Rick Wagoner didn’t want to do that. He wanted to stick with primitive trucks. He slept through the fuel price increases and, above all, he neglected to start putting the latest technology into production. Now he says GM will soon have a super-modern, super-economical turbo diesel in their lineup. It will incorporate the latest downsizing technology, and will have all kinds of performance, power and torque – all from just 1.4 liters displacement (about 85 cubic inches).
That engine could replace a six-cylinder gasoline model. Where did Wagoner get such a marvelous thing so quickly? He got it from us. That’s what Opel is so good at. The engine in the Smart, for example, was copied directly from an Opel engine. Opel’s masterpiece, the 1.8 liter engine, is considered by Daimler, BMW and even Porsche to be a benchmark achievement. And the costs! If I told you how inexpensive our fantastic three-cylinder engine is to manufacture, you wouldn’t believe me. When it comes to economy cars, nobody in the world can show us up, not VW and not even Toyota. We’re their equal on that playing field.
General Motors doesn’t understand the European auto market nor will they ever catch on. They laugh themselves to death when they hear that an Opel Astra costs 25,000 Euros. For that kind of money in the United States, they can get a crate 50 percent bigger with a Bose super sound system, air conditioning, and all the bells and whistles. That’s why they don’t think much of European quality standards. American cars have crappy suspension systems, garbage-dump brakes and unrefined engines. A little three-cylinder Opel Corsa will run wide open up and down the Autobahn between Hamburg and Munich for days on end. For an American engine, that would be a death sentence.
The best thing for us (that is to say, for us engineers) would be a partnership with Daimler or BMW. Neither possesses much in the way of economy car expertise. O.K., BMW has the Mini, but they barely break even on it and selling 150,000 of them a year won’t help, either. That’s why our European boss Forster paid BMW a visit a few months ago. They were looking at the possibility of a common platform for Opel and the Mini. The deal fell through because of minor details. Forster now says he would have handled discussions a bit differently had he known then what he knows now. And, he added, BMW would have come out better had they done the same.
If Opel has its back to the wall, the dominoes will start to fall
They have every reason to do so. BMW is approximately the same size as Opel and has many of the same problems, it’s just that they’ve only now started noticing that. The BMW 1-series is selling well at the moment but is only marginal, quality-wise. Mainly, it has a cost problem. Production figures are too low and the Bavarian firm can no longer afford its high-tech features. In cooperation with Opel, that would change. Technically and qualitatively we speak the same language. Most of the engineers at Opel and BMW already know one another personally.
And then there’s Daimler. In building the Smart or the A-Class Mercedes, it’s obvious across the industry that they lack the know-how to build them profitably. I’m not being conceited. I admit openly that if Opel wanted to build a high-end limousine like the Mercedes S-Class, it would take three or four model generations before we could offer a first-class product. Daimler and BMW are simply way out front in that area. But when it comes to small cars, they’re still in the learning stage. Opel and Volkswagen are really the only European companies that have the knowledge, experience and quality-consciousness needed for that.
I have no crystal ball insight into high-level financial strategy. I can’t predict that Opel will be able to repay all its loans within two or three years. But I am certain we shouldn’t postpone the new Meriva. This car will bring in the cash and plenty of it. We wanted to bring it out in January 2011, but those plans had to be shelved. GM even wanted us to delay our cash-cow, the new Astra, for a whole year. Fortunately, Forster was able to convince them to change their minds on that. It’s now scheduled for introduction this fall.
If everything is so great, then why does Opel want a government-guaranteed loan? Because there’s no automobile manufacturer that doesn’t run on loans. Before production can even begin, Opel already has huge bills to pay to suppliers. They, in turn, need that money to pay for their production facilities. That’s the reason we need the loans. It’s not about losses or current operations. They’re running extra shifts in the Corsa factories, the Insignia is already a huge success with a backlog of 75,000 orders and the new Astra has the stuff to overtake the VW Golf in sales. Meriva and Zafira are bestsellers. The outlook couldn’t be any brighter.
If the German government lets Opel go bankrupt, a whole row of dominoes will topple. Who is aware that in every car in the world there are at least 60 parts provided by the Schaeffler company? (Trans. Note: Schaeffler is a major producer of automotive and aeronautical roller bearings). They’re used in Toyotas and all the vehicles produced in India as well. If Opel’s production of 1.4 million vehicles is lost, it could well be the death-knell for Schaeffler. And what would that mean?
Opel wouldn’t be the only one to feel the effects of that. Such a blow would tear a gaping hole in the entire fabric of German parts manufacturing. Volkswagen, Daimler, BMW, and Ford – everybody would suffer. Here’s an absurd theoretical example: let’s assume Bosch goes broke. Nobody would be able to build cars. If any supplier is teetering on the edge and Opel, with its 8 to 10-percent market share goes down, then it’s curtains for Bosch. There’s not a single CEO in the automotive branch that would disagree with that.
I spent a lot of time in the United States and I know pretty well how GM is organized. I have a great deal of respect for their technicians and engineers, but GM’s management isn’t worth discussing. Those are the people who plundered Opel and forced their model policies on us along with their concepts of quality and what a European bestseller should look like. But did we at Opel also make mistakes?
We certainly did. We failed to stage a palace revolution in 2004 when 9,000 workers had to be laid off. That’s when we should have said, “If Opel has to sacrifice 9,000 people because General Motors drove us into a ditch, we’re not going to stand for it. From here on, nobody dictates to us what the European market needs or doesn’t need. From here on, we’ll decide that.” That’s what we should have said back then.
But we didn’t.