GM Brings in a European to Look Under Opel's Hood

General Motors has no illusions about what it will take to fix its biggest European subsidiary, Adam Opel. The massive repair job, entrusted to former BMW Production Chief Carl-Peter Forster, has been dubbed Project Olympia at General Motors Corp. (GM ) Forster's job is to stanch the losses at Opel, restore the German brand's tarnished image, and revive drooping morale at the Russelsheim headquarters near Frankfurt. Outside the company, expectations are running almost impossibly high: Der Spiegel magazine anointed the new German boss a messiah for Opel.

GM has a lot at stake. With annual sales of $15 billion, Opel accounts for 95% of the U.S. auto maker's vehicle sales in Europe. Its troubles have soaked GM Europe--which also includes the premium Saab marque--in red ink. GM Europe lost $240 million in the first half of 2001, on top of a $257 million loss in 2000. GM, which faces a slowing market at home, can't keep racking up such losses in the huge European market, once a rich source of profit.

TRENDY RIVALS. Style-conscious Europeans are shunning GM cars for flashier models. Although its main nameplate, Opel, has produced hits such as the popular $18,000 Zafira compact minivan, the overall lineup lacks flair. Critics say the $9,600 Corsa compact launched last year looks far too much like its predecessor. "It looks too boring and too conservative for a product sold primarily to women," says Peter Schmidt, an analyst at Automotive Industry Data in Warwick, Britain. "European car buyers have been spoiled by trendier rivals, such as the [$11,500] Peugeot 206."

It's not just a matter of looks. A recent JD Power & Associates survey found the quality of GM cars lagging behind European rivals such as Volkswagen, Renault, PSA Peugeot Citroen, and Ford of Europe. It's hardly surprising, then, that GM Europe's market share slipped from 13.1% in 1995 to 11% this year. Over the same period, Opel was struggling with a whirlwind series of American bosses--four in four years. Meanwhile, clashes between Opel and American-born executives at GM Europe headquarters in Zurich have left some German brass and engineers dispirited. "We created some problems for ourselves," concedes GM Europe President Michael J. Burns. He is cutting some 4,200 jobs this year and next at GM Europe, and slashing production capacity by 16%. More cuts are likely, say GM officials, when Forster in September presents his plan to revive Opel. "We're not where we want to be, and this will take time to fix," Burns says.

Rivals and car analysts view the appointment of Forster in April as a shrewd move. A German born in London, Forster, 47, led the team that developed BMW's superb $26,600 5-series luxury sedan. "It'll be easier for someone with a European background to ensure the new products they develop respond to the requirements of European consumers," says Ulf Nord, vice-president of the global automotive group at research firm DRI-WEFA in London. "They're on the right track." Maybe so. But it will require a Herculean performance from Forster for Project Olympia to succeed.

By Christine Tierney in Prague, with Katie Kerwin in Detroit

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