GOTHENBURG, Sweden — General Motors spent nearly two decades trying to fix Opel. Its new owner, PSA Group, managed to turn the business around in less than two years.
Under PSA, Opel slashed its fixed costs. It sharply simplified its product portfolio. And Opel CEO Michael Lohscheller took away the cookies from every meeting.
"It's symbolic and better for your health," Lohscheller said here at the Automotive News Europe Congress last week.
Opel has become much healthier, indeed. After losing some $20 billion from 2000 until GM sold it in 2017, it returned to profitability last year.
But it's not really about the cookies.
"What made a big difference was that within PSA, Europe is the core business, and this focus on Europe made a lot of things easier," said Lohscheller, who was promoted to CEO from CFO in mid-2017, soon after the sale was announced. "In the past, we tried to find global synergies, which sometimes are not so easy to find. What are really the synergies between an Opel Corsa in Croatia and a pickup truck in Idaho?
"I keep saying, 'Paris is closer than Detroit ever was.' It's a summary of how we do the business now."
The first move was to cut the ranks of upper management by 25 percent.
"You have to clean the escalator from the top," Lohscheller said, citing a German saying. After doing that, Lohscheller said, "People realized this is serious."
He added that "costs are your best friend" because they are something the company can control. For example, Opel's product costs per vehicle were down €367 ($410), more than half of the $785 reduction target for 2020 under Opel's PACE turnaround plan announced in November 2017.
Another key driver of the turnaround was quickly moving to PSA architectures from GM platforms. Under GM, Opel had nine platforms; under PSA, it will have just two within a few years.
Ten engine families are being reduced to four, Lohscheller said.
"That's a massive complexity reduction with huge, huge benefits," he said.
GM-engineered models such as the Adam minicar are being phased out. Among the PSA-based models to come in the next 18 months are the next-generation Corsa small hatchback, Opel's perennial best-seller, and Mokka small utility vehicle, another strong seller. Both vehicles will be available with a battery-electric drivetrain as an option.
Opel's transformation also is being propelled by benchmarking, against external competitors and within PSA Group. Lohscheller said he was dismayed at first when he saw how far behind Opel was compared with PSA's metrics, but it roused the competitive spirit of his team.
"Do not underestimate the power of benchmarking," he said. "We quickly developed plans on how to catch up. And the Opel people wanted to catch up; they wanted to be better."
Compared with industry benchmarks, Opel pricing has improved by 2.2 percentage points, Lohscheller said — but prices are still 6 percent below the target.
"On pricing, we're still a bit behind," he said, noting that Opel had improved channel mix and trim level.
Opel's operating profit in 2018 was about $960 million, the highest in its 157 years as a company. The operating margin was 4.7 percent. Free cash flow was $1.5 billion. Profits per car increased by about $1,550 in Germany, Lohscheller said.
Fixed costs were cut 27 percent on a like-for-like basis in 2018, said Lohscheller.
