General Motors is reassessing how it uses overburdened Adam Opel AG to execute its huge and ambitious plan to enter global markets.
At the same time, massive changes are either under way or are being studied to stem the bleeding at Opel.
According to Opel Chairman David Herman, an internal study proposes to:
Eliminate up to 10,000 of Opel's 45,000 blue-collar jobs.
Cut other costs.
Change how and where Opel builds cars.
Herman stopped short of calling the problems at Opel a crisis. But he said he doesn't regret that the conflict between GM International Operations and Opel came to light.
GM gave GM International, including Opel, the responsibility of developing vehicles for global markets, such as China, Brazil, Eastern Europe and Thailand. The huge task has taken its toll on morale at Opel.
The problems came to light when various publications printed results of a recent internal survey of Opel engineers and managers.
SHORT ON CONFIDENCE
The 300 top Opel executives in Europe said they had little confidence in the direction of the company, in the way it was being run, and in top management.
They warned that the marque's future products will be shortchanged if GM keeps raiding Opel resources and using them for globalization.
They are equally worried that GM's new global cars are too generic, dominated by North American tastes, and not suitable for the European market.
Herman said he wants GM International to tackle three other issues, which, if neglected, 'could substantially weaken Opel.' Herman said he wants to:
1. Separate international development and resources from Opel projects to stop the drain of brains and resources.
2. Boost Opel quality from today's low levels, and demonstrate the new standard with superior quality on next year's Astra replacement.
3. Address growing concerns that new global platforms must meet Opel, not just North American, requirements.
GM Europe should be allowed to leave the Delta car program, GM's first global car, if Opel is not satisfied, he said.
Opel earnings and market share fell in the first half of this year. They are not likely to recover to 1996 levels this year because of soft demand and high incentives.
NO PLANT CLOSINGS
Herman said Opel has decided not to close a factory and cause social turmoil like competitor Renault. Nor will it reduce capacity in Europe like Ford, he said.
In short, Opel will not cut capacity in Germany, but it wants flexibility, and needs to cut costs dramatically, said Herman.
The company is asking workers to make concessions in return for job and investment guarantees for future vehicles that they desperately want, he said. Opel may shed up to 10,000 of its 45,000 hourly jobs with early retirements, and by not replacing workers who leave.
Being discussed with the unions and GM in Detroit is the rebuilding of Opel's Russelsheim assembly plant to house the entire line on one floor, not the current two.
The issue is being negotiated in a new three-year contract to replace the current pact, which expires in December. The unions represent 45,000 workers.
Because Opel vehicles and manufacturing processes are the base for GM's expansion into new markets, the subsidiary's Technical Development Center has been working on projects for both GM International and Opel.
The company is studying how to delineate International and Opel projects to curb the brain and resource drain on Opel. The two won't be separated legally, but 'international people will work only on international projects,' Herman said.
In the past, GM International has had what it describes as an 'ad hoc call' on staffing, and 'this was disruptive,' Herman said.
The double-duty and special assignments took their toll on Opel product development because experts were often tied up by international projects.
GM has stopped the practice of whisking away 10 or 12 people to a meeting in the United States on, say, developing vehicles from a common platform in 2003, Herman said.
'The whole organization is waiting to see how this turns out. It is clear to me that if we need additional resources for the core business, we will get them,' he said.
The technical center would not be affected by the job cuts. Because of globalization, its work force is expected to grow from 7,800 engineers and technicians in 1993 to 8,520 by the end of the year.
Because its image has suffered, Opel needs to successfully launch the Astra replacement next year. The Astra is one of Opel's major sources of profits and sales.
LATE LAUNCH FOR ASTRA
Opel delayed the Astra launch from this fall to next spring to assure quality. The company empowered an 'almost independent' launch team for Astra that reports directly to Dick Donnelly, chairman of GM Europe.
Opel is making new investments in Astra, such as a fully galvanized body 'that should help solve our rust problems and quality,' Herman said.
To boost quality in the entire range, Opel has also reinstated intense manufacturing inspection and hired 100 new quality engineers.
The public airing of Opel's poor morale also forced GM to examine how it is developing its new global cars due after 2000.
Herman says Opel wants assurances that European concerns and requirements will be addressed. If not, it wants the power to drop out of global programs.
Major problems have emerged with North America taking the lead in the Delta program, GM's first major attempt to develop a platform for North America and Europe for after 2000, according to GM sources.
Under this platform program, Europe will be in charge of three smaller platforms, and North America the larger vehicles and trucks. From Delta, GM will produce replacements for Europe's Astra and North America's Chevrolet Cavalier, Pontiac Sunfire and Saturns.
PROBLEMS IN EUROPE?
European engineers say that the direction Delta is taking won't meet even basic European needs such as a roomy interior and good fuel economy. The trunk space in Delta is smaller than today's Corsa, Opel's smallest car, and there are no plans to include higher technology, such as traction control, that Europe needs in this segment.
Herman said that both Lou Hughes, president of GM International, and Peter Hanenberger, International's head of development, have said if 'the result of the (convergence) process could be European and customers suffer, then we won't do it.'
'(Opel managers) are waiting to believe that. They want to see solutions. If they don't see solutions, they want to see actions,' said Herman.
He admits there are no guarantees from Hughes or GM. 'I am relying on what Hughes said in the President's Council. We should all believe in that.'