Opel works towards building a "democratic" brand

The business plan: hold market share, and Chevrolet's exit

Opel recorded its first share gain in 14 years at the close of 2013 – a modest 0.1%, but enough to re-energise the company. Opel's supervisory board chairman, Dan Amman, told us that the small gain was "very marginal in terms of absolute size, but very consequential in terms of signaling and demonstrating the progress of the business". GM and Opel reduced their losses by half, slowing the bleed and setting the company up for improved performance going forward, and staying on track to break even by mid-decade. However, according to CEO Karl-Thomas Neumann, some of the financial impacts will hit in the 2014 fiscal year, including moving Zafira production to Russelsheim (Germany) and closing Bochum, with the benefits to accrue in 2015 and beyond.

Neumann said the improved market share is impacting the attitude of employees for the better. "We are not defenders and losers anymore, but we are really on attack again," he said. This attack includes an addition to the Adam range, the Adam Rocks, as well as a commitment to 23 new models and 13 new engines made in early 2013. The Geneva Motor Show was the backdrop for the introduction of two of these engines, as well as the Adam Rocks and a go-faster 150HP Adam S.

Another step is demonstrating change to the dealer body, according to Neumann. "You have to make them believe in you again and you have to demonstrate to them that you do it differently. They need to believe that we have a plan here, that we are consistent, that we are not going away from this plan, that we have a financing arm again to support them."

GM and Opel believe that the decision to drop Chevrolet (except for the Corvette) from Europe by 2016 clarifies the Opel/Vauxhall market position. Amman said, "I think there was confusion and what we have now … we have clarity in the role for Opel and Vauxhall. There's a clear, mainstream brand with German engineering and exciting styling, and a great value proposition for the European market."

Meanwhile, chief marketing officer Tina Muller is focusing her Opel brand-building campaign fully on rebuilding Opel, independent of what GM does with Chevrolet. She did not seem to find as much confusion in the overlap between the two brands. "I think not many outsiders made the connection between the brand Chevrolet and the brand Opel … Opel has such a long German tradition that nobody put it in one basket with Chevy." Instead, Muller sees her job as getting people to take another look at today's Opel in order to understand that it is both different and relevant.

Chevrolet's eventual exit represents a challenge and an opportunity for the dealer relationship as there is some risk that dual Opel-Chevrolet dealers opt to put something other than Opel on their newly freed-up floor space. "We want that free floor space to now be made available for Opel, so the dealers invest in Opel and they are confident that they can generate profit-making revenue on this floor space," Neumann said.

The brand: rebuilding a positive image

Neumann and Muller are also addressing the erosion of Opel's brand image. "We are really working on the brand. The brand had huge issues in Germany ... we have really changed our advertisement to address this subject, the misconceptions about the brand, the prejudices out there," Neumann said.

Neumann has identified three basic elements for Opel brand attributes: being German, emotional, and approachable. Neumann defined the "German bit" as "the passion for detail, the passion for technology, the passion for precision". He wants Opel to be "emotional, design-driven". "We want to have features in the car that put a smile on your face," he said. The third element is for the brand and the company to be approachable. Neumann supports this by being extremely active on Twitter. "Approachable in every aspect. The management is approachable … but, more than that, we want to position the cars such that they are not distinct, they are not premium, they are in the middle of society," he explained.

Brand image cannot be adjusted without product and technology, and Opel has seen success with the Adam and the Mokka. As well as satisfaction with the sales figures, Neumann and Muller confirmed that the Adam is skewed 70% towards female with an average age of 40, and 50% of Adam buyers are new to the brand. Muller sees an opportunity to expand again, saying, "I believe the Adam Rocks is more unisex than the Adam and will also recruit a lot of young men."

In addition to the two new models, Opel is adding OnStar and making it nearly 100% available across the range, including the option for a 4G LTE Wi-Fi connection. Muller labelled connectivity another of Opel's brand values with the addition of OnStar. While details of the subscription service are being ironed out, Neumann confirmed that with GM's modular electrical architecture, Opel has benefited from reduced investment costs from the ability to largely plug and play components developed for use in other markets. Opel is in the process of building the service side, including European call centres and technology.

Tina Muller joined Opel in June 2013 after a career in the cosmetics industry, and brings a fresh view to Opel's marketing approach. Muller sees Opel as a mass market, volume brand, which GM needs it to be. "It's a democratic brand, it's not a luxury brand," she said.

On the differences between her former and current industries, Muller said that from a marketing standpoint "the product is not so important. It's much more the brand. Today, in nearly every industry, you have equal products, more or less … but what really makes or drives the preference is the brand and how relevant is your brand … how to position the brand in a way so that you can easily answer the question why Opel and why not a VW".

In developing the latest efforts to reposition Opel, Muller said, "It was not the highest social acceptance to drive an Opel. So we had to somehow shake that up, to penetrate the message: Opel is not any more what you think it was. You have to look with a fresh eye on the brand again." Muller has contracted six new brand ambassadors, believing that people will more easily shift their impressions of the brand; so far, efforts are paying off, she said. "Since October last year, we see that the image is catching up significantly. We see that the brand opinion is changing … we really provoke that people look at Opel in a new way."

So, where does Muller see the Opel brand? "Where Opel can really make a difference is the combination of German art of engineering with an exciting design." In terms of whether Opel is capable of supporting a premium or luxury brand, she said, "Everyman's car means you … have to cover nearly every segment, but due to the recent history of Opel, we first have to concentrate now on our core segments, before we enter into the really more luxury segments. Today, the brand would not support a BMW 5 or 6 or 7, it's too early yet."

While believing the brand is not ready for a luxury entry, Muller also discussed that Opel is looking at the possibility of a sub-EUR10,000 entry. "The Adam is between EUR12,000 and EUR16,000, so we also see a need below EUR10,000. That is also a strategic focus for us."

Leveraging her experience in turning the image of cosmetics brands around, Muller says she's comfortable fighting against loyalty. "You have to be faster. You have to dare more. You have to challenge what the stage is for, and you have to be bold. You have to do things which the market leader cannot do, and that's what we want to do. We want to be really courageous and creative." At the same time, she said that there is a strong need for consistency as the next-generation Corsas and Astras arrive.

What's next?

We asked Neumann what he expects to see out of 2014, and if there is concern that the uptick in sales last year might not be sustainable this year due to fewer all-new products being introduced. Among the elements he cited are that the latest Insignia didn't arrive until December 2013, so 2014 is its first full year; that with Mokka production having been added to Zaragoza, dealers will not be capacity constrained; and that Astra's new diesel provides that model with the right powertrain for the market.

Post-2014, one item that was not on the agenda – although Neumann warns "you should never say never" – is a return to the US for the Opel brand. "We look at brands in a much more sophisticated way now at GM, where we really try to find for every brand its key role in the region where it's working, and the Opel brand, you have to be honest, is a very European-centric brand. Building up the brand outside of Europe is a lot of investment … it's Europe and what is adjacent to Europe." This does not eliminate the potential for an entry like the Adam to find its way into another market. Neumann said that, as an example, "if Adam would be a huge success in China, it would most likely be produced in China, and it would be a Buick anyhow".

Relative to global platform-sharing and regional brand performance, Amman said, "On the one hand, you'd like to have global consistency in everything, but the reality is our customers are not consistent across the globe … different markets have different needs. So the challenge we have and part of what we're trying to do is to meet … the unique needs of each market with as much commonality underlying as possible … flexibility within the product offerings we have and the way we engineer the cars, so that we can provide and exceed the needs of the customer in every market, but to do it with a much more consistent global tune."

The goal to better leverage GM's scale is demonstrated by Buick and Opel getting closer and closer. "They have a history of being together, the attributes of compact, efficient, well-engineered cars, exciting design, that all fits very nicely…The good thing is that Buick and Opel don't show up in the same market," said Neumann.

Outlook and implications

Opel has been struggling since at least 2000, with global sales declines more often than gains. At this point, however, the company has the opportunity to move forward with less distraction and the opportunity to focus on executing the plans laid in the past year. The question of remaining under GM control is settled, the new management team at GM is committed to Opel's success, and the questions of overlap with Chevrolet have been fully resolved with Chevrolet's exit from Europe.

This century the brand has been nearly wholly dependent on Western Europe for sales, with 87.8% of the brand's sales in 2000 coming from Western Europe alone; this has shifted only slightly, with Eastern Europe growing over the past two years to 12.7% of Opel sales in 2013, while Western Europe slipped to 80.1%. Central European sales have varied from 4% to 7.6% over the past decade. By 2025, the split is forecast to be 74.1% in Western Europe, 14.7% in Eastern Europe, and 8.6% Central Europe. The Middle East/Africa region is of more significance to Opel than China at 1.9% of sales in 2025; Opel's sales in China have measured less than 1% and will continue to do so as GM relies on the Buick and Chevrolet for sales in that region.

IHS Automotive forecasts a small decline in Opel's sales in 2014 at 974,000 units, down from 1.05 million in 2013, though gains are forecast for the Adam, Agila, Cascada, Insignia, Meriva, and Zafira Tourer. We forecast Opel crossing the 1-million-unit mark again in 2015 and reaching 1.4 million units in 2019, though slipping back a little by 2021. Overall, Opel is forecast to see CAGR of 3.8%. Working in Opel's favour will be a fresher vehicle portfolio. According to IHS data, the portfolio age peaks in 2014 at just below six years, dropping to just over two years in 2018. Opel and Buick will swap positions in the coming forecast for the spot of GM's second-bestselling brand; the top-selling brand will remain Chevrolet. The Chevrolet division is forecast to reach the 5-million-unit mark by 2018 and remain there through at least 2021.