Aug. 22 (Bloomberg) -- General Motors Co.’s Opel unit is refreshing the mid-sized Insignia with new engines and dashboard instruments to win customers back to an auto brand tainted by more than a decade of losses that put its survival in question.
Production of the revamped Insignia, Opel’s most expensive car with a starting price of 24,325 euros ($32,500) including sales tax, began today at the plant at company headquarters in the Frankfurt suburb of Ruesselsheim. The model is the eighth in an 11-car line-up that the company has introduced or updated in the past three years in a strategy to counter consumer doubts about the division’s future since an aborted disposal in 2009.
“Opel has never had such great models as today in recent history, but the brand is burnt,” said Ralf Kalmbach, a Munich-based partner at Roland Berger consulting company. “Rebuilding of the brand is a key challenge and may take many years.”
GM’s European operations, consisting mainly of Opel and its U.K. sister brand Vauxhall, have lost more than $18 billion since 1999. The two nameplates’ annual western European deliveries fell by about half from that year until 2012, compared with an industrywide drop of 17 percent, and their market share narrowed to 6.7 percent from 10.9 percent, according to data from the ACEA regional automaker trade group.
A sale of Opel to Canadian auto-parts producer Magna International Inc. and Russian partner OAO Sberbank was among options that Detroit-based GM considered as the U.S. company struggled to restore group profitability during the global recession in 2009. GM, which has controlled Opel since 1929, chose instead to keep the business and reorganize it, and executives have vowed to make it profitable by mid-decade.
The earnings-restoration plan includes the first shutdown of an auto factory in Germany since World War II, a reduction of its manufacturing workforce across Europe and a pay freeze for remaining employees in exchange for preserving jobs. GM Europe’s second-quarter loss before interest and taxes narrowed to $110 million from $394 million a year earlier.
Opel Chief Executive Officer Karl-Thomas Neumann, a former manager at Volkswagen AG who took over running GM’s European operations in March, is the fifth person to lead the division since the Magna deal collapsed.
During that time, Opel has contended with reversals such as a German legal settlement in 2011 to modify vehicle warranties and the abandonment this year of an offer to convert the car plant in Bochum, Germany, to parts production instead of closing it, following worker’s rejection of the deal.
“If the Opel brand lacks anything, it’s continuity,” Juergen Gietl, managing partner of Nuremberg, Germany-based consulting company Brand Trust GmbH, said by phone on Aug. 20. “The permanent change in management and promises as well as the announcements of plant closures eroded the trust of the employees and the customers.” At the same time, “Opel has too many fans to vanish completely.”
The Insignia is being offered with a selection of more-efficient turbo diesel or gasoline motors, as well as simplified touch-pad and voice-activated navigation, radio and wireless controls to reduce distractions to driving, according to Opel statements in the past three months. The car will go on display at the International Motor Show in Frankfurt next month.
The car “is the next important milestone in our model offensive,” Neumann said today at a presentation at the Ruesselsheim plant, which is also building a right-hand-drive version of the Insignia for the Vauxhall badge.
The production start is a “sign of the motivation and commitment of our team to returning Opel to the path of success,” Wolfgang Schaefer-Klug, head of the division’s works council, said at the presentation
Other Opel models introduced in the last year include the South Korean-made Mokka compact sport-utility vehicle, which went on sale in Europe in October, and the Adam city car, which the company began producing in Germany in January. Opel said in July that the Mokka will be made in Saragossa, Spain, starting in the second half of 2014 after customers placed 100,000 orders for the SUV in its first seven months on the European market.
The promotional effort for Opel includes widening ties to European soccer teams. The GM division started airing advertisements in January featuring Juergen Klopp, a former player who’s now head coach of the Borussia Dortmund team. Opel began sponsoring Dutch sports club Feyenoord Rotterdam in March, adding to the carmaker’s backing of five soccer teams in Germany’s Bundesliga and Vauxhall’s support of the U.K.’s four national teams.
To broaden its customer base beyond Europe, where the car market is at a two-decade low, Opel is also selling vehicles in Israel, Chile, Singapore and the United Arab Emirates. An 11-month effort to market Opel models in Australia ended this month after it proved unprofitable.
“Opel is on a good way with its new vehicles,” Brand Trust’s Gietl said. “The question is, will they be able to remain on track for a couple of years?”
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