GM’s OPEL The Cat’s Meow or Going to the Dogs

German carmaker Opel is trying hard to shake off its staid image with slick marketing and snazzy models, but the closure of a factory and trouble in Russia are bruising its bottom line.
Can Karl's cat save Opel?

An alluring model with champagne-colored hair named Choupette is the star of Opel’s new ad campaign for its Corsa model.

The fluffy Burmese cat, whose owner is none other than German fashion designer Karl Lagerfeld, lies gracefully on the steering wheel, lounges around on the car’s hood, or looks coquettishly in the rearview mirror. Without question, the image of the General Motors’ German division is more feminine and playful than it has been in a long time.

Tina Müller, who has been leading Opel’s marketing department since August 2013, has clearly put her mark on the brand. A year ago she started the Opel advertising campaign, “Re-park Your Mind,” a bold plea against the widespread prejudices many Germans have against Opel. The advertisements have been showered with industry awards.

But the latest figures from Opel made public by GM on Wednesday gave little reason to celebrate: A charge of some $700 million, or €611 million, related to shutting down the Opel factory in the German city of Bochum blew a hole in the carmaker’s books.

Severance packages, the dismantling of the plant, and relocating the production of the family van Zafira to Rüsselsheim near Frankfurt have all placed a tremendous burden on the firm’s balance sheet, which shows a loss of $1.4 billion for Europe alone last year.

Without the Bochum closure and Russia, Opel's operating losses would have been somewhat less than in 2013.

Another element driving losses is Opel’s business in Russia. The difficult political situation there has led to a loss of $200 million.

Was the high level of investment in marketing all a waste of time? Franz-Rudolf Esch, a marketing professor at the EBS University of Business and Law in Oestrich-Winkel, considers the “re-parking” campaign to be a “good start at turning around the image.”

Video: Opel Corsa and Choupette by Karl Lagerfeld.

The change in image is evident in the measurement of the brand value. Within one year, the brand value of Opel rose by 10 percent to €1.1 billion, according to “The Brand Ticker,” a survey conducted by the consultancy Spirit for Brands. “Rather remarkable,” said the consultancy’s managing director Walter Brecht. But, he adds, “Opel’s competitors surely have much higher brand value.”

Opel boss Karl-Thomas Neumann practiced his calculated optimism on Wednesday after the figures were presented. “Together we increased the operating performance of Opel-Vauxhall and won market share, although the market conditions got more difficult,” he wrote to Opel employees.

Without Bochum and Russia, the operating losses would have been somewhat less than in 2013. In the hopes of better times ahead in Russia and the end of the burdens from Bochum, Opel’s management is continuing to hold on to its plan to be in the black again in 2016.

Rival carmaker Ford – which is number two in Europe after Volkswagen but still ahead of Opel – also recently reported losses in the billions. Ford did not have to bear the burden of a factory closure, but also suffered considerable losses in Russia.

Opel is hoping that the many marketing initiatives in the past few months will help give the brand a noticeable boost in sales numbers this year. For example, the fifth generation of the best-selling Corsa, which still represents a quarter of all Opel sales, was introduced in the fall and has been available at dealers since January. There were already 85,000 customer orders for the compact car before Christmas, when it could still only be seen in pictures.

Opel management has equally high hopes for the new Astra, the second top-seller in the program, which is responsible for a similar share of sales as the Corsa. The new Astra model is expected to be introduced this fall and be available at dealers in about one year.

To what extent the marketing head Ms. Müller has been able to really “re-park” the brand will be seen in the coming months. But there’s still a long road ahead to achieve value-enhancing changes in the brand, say industry experts.

“The question is: Where is Opel driving with the re-parking?” said Torben Hansen, co-owner of the advertising agency Philipp and Keuntje. In the end, it is the cars, not the advertisements, that matter.

 

Catrin Bialek and Christian Schnell are reporters for Handelsblatt in Düsseldorf and Frankfurt. To contact them: [email protected] and [email protected]