Can someone please explain this to me? To field a credible small car stateside, GM has decided to import the relatively diminutive Opel Astra from Europe into the U.S. and re-badge it a Saturn. Because of the unfavorable exchange rate between the U.S. and the Eurozone, and the fact that the Astra will be screwed together in a high-cost country (Belgium), GM will make a loss on every Astra sold. So the more Astras they sell, the more money they'll lose. And yet, Just-Auto [sub] reports that GM has decided to increase the number of Astras headed stateside from 30k to 40k per year. Originally, we heard that the Opel Astra was a "placeholder;" if it sold in sufficient quantities, GM would transfer production to the U.S. But building cars in the U.S. isn't any cheaper than assembling them in the land of mayonnaise on your french fries. It can't be a Corporate Average Fuel Economy (CAFE) pleasing deal, as the imported Astra wouldn't count towards GM's domestic CAFE averages. Is it a union thing? A world car thing? A stupid ass hubris WTF GM thing?
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Building cars in the US will definitely be cheaper than in western Euro when the 2-tier and non-core wage packages kick in, not to mention the quickly depreciating dollar.
Does anyone expect GM to make correct decisions anymore?
indi500fan:
Building cars in the US will definitely be cheaper than in western Euro when the 2-tier and non-core wage packages kick in, not to mention the quickly depreciating dollar.
So why not just build it here?
Like anything else GM has done lately, I figure it has to do with leadership having their heads firmly planted in their behinds.
This is a point I made a long time ago and no-one listened to me (a bunch of guys not listening to a girl about cars! Big shock!).
Many people make a big deal about GM’s deal with the UAW and how it slashes their cost, but while it’s a big deal it’s not the only crack in the dyke.
Selling cars at a loss is a huge problem. GM complain about excess capacity in their NA plants, then to remedy the problem, they import a car from a market which is enjoying (or cursing, depending which way you look at it) a record euro to dollar rate. Not to mention, import fees and logistics on getting the car from Europe to the United States.
It just smacks of bringing a car to a market to compete with their rivals without thinking the whole thing through. Personally, I think the Astra’s interior is horrible (one word: “Sterile”), people do buy them……
P.S Mayonnaise on chips? I thought that was a Dutch thing……?
Okay… this one’s easy…
1) They believe demand will outstrip supply.
2) Saturn desperately needs a competitive subcompact if they’re to attract more import buyers.
3) GM may be considering a long-term merge of their numerous European/American/Asian car platforms and this short-term cost may be more indicative of a ‘test’ in that direction.
I think importing the Astra is a very intelligent move for Opel, Saturn and GM. It has the foundation for creating greater economies of scale, making Saturn out to be a genuine Euro/Japanese competitor (so long as the interiors improve), and may allow GM to launch one compact platform within the next five years. They need to concentrate their R&D resources if they have any hope whatsoever of remaining a global leader.
Now as for the Cadillac BLS, Chevy Uplander, and the Pontiac G6… um… let me get back to you on those.
I may be niave, but perhaps GM considers the reputation boost that comes from selling a good compact car (finally) worth the monetary loss. If that is the case (and they can afford it), it might be indicative of some long overdue forward thought.
It’s an investment in establishing brand loyalty, obviously. Obviously.
Ryan Knuckles, that assumes, of course, that the Astra actually will be a good compact car. If it’s anything like GM’s other compacts, then they’ll be losing even more potential customers. Although, ig GM doesn’t sell many Astras, then I guess they won’t lose as much money. I wonder if GM is secretly hoping the Astra fails like almost everything else GM’s made.
I don’t think many dedicated import buyers will go into a Saturn showroom for the Astra. Thus, I see this car’s biggest competition will be the Aura. So when does Chevy and Pontiac get a rebadged version?
Is it a union thing? A world car thing? A stupid ass hubris WTF GM thing?
It’s a stupid ass hubris WTF GM thing!!
Recently a lot of things seemed to have changed at GM but obviously the the stupid decisions department is alive and well.
As a matter of curiosity, have the vital signs improved enough to take them off Deathwatch?
lprocter1982:
Yes, it does assume that. If they made this decision on a decidely bad car, then it would be categorically stupid.
At GM, decisions take a looooong time. As this decision was slowly pondered and processed around Warren and the Ren Cen, perhaps nobody noticed the plummeting exchange rate.
They should have though, surely lots of those boys gamble and shop across the river in Windsor.
As the unofficial automotive historian around here, I “have to” point out that when Castaing (of Renault) was in charge of American Motors in the mid 1980’s, apparently he held a meeting with executives stating that
“Here’s the bad news and the good news. AMC Renault Alliance and Encore sales are both down.
It’s bad news because we are losing market share, but good news because we are losing less money, since we lose money on every car built.”
Hey, AMC, how’d that work for ya? (We all know the answer, don’t we, gang?)
Maybe it’s a smaller loss to import them than actually design, develop and building a viable small car here… And loss a lot to rebates, fleet sales, rebates, general ass-whippings from Asian alternatives. Looks like the General is in slow down the overall relentless slide to chapter 11 mode.
I dunno — the Astra is an attractive (externally) small car, and I think that the availability of the two-door hatch (a rare configuration) may draw potential VW Rabbit customers into a Saturn showroom (where I believe they’ll be steered towards the Aura).
That said, I’m not sure if I would buy one, as the 1.8 Ecotractor powerplant detracts from the overall package; even Cobalts get the 2.0!
Antone,
Respectfully, not sure I agree with you there. The majority of the work (i.e design, development, quality of materials etc) has already been done in Europe. GM North America have the blueprints for this car, they just need to find a plant with capacity to take production on. One couldn’t even argue “sourcing suppliers” because they can just ask the suppliers to Europe to send some their way.
Building brand loyalty is a plausible theory, but a flipping expensive one! That would be a case of “can GM afford it”? Well, only time will tell…….
I am the first person to criticize GM for its bloated bureaucracy, generally awful designs and bumbling management. But if the goal is to start selling a good compact in the US, this is a good idea.
It comes down this — sourcing the car from somewhere else makes it possible to bring the car to market more quickly, and to do it with less R&D money and lower set-up costs. Perhaps more importantly, it allows GM to test the market and see well they can do with it, a reasonable consideration when considering how often these Euro-American cars have flopped here. They can kill it or retreat fairly easily and at fairly low cost if it doesn’t work. This is a more cost-effective and timely way to discover the market than it would be to build or convert a plant elsewhere and start building them from scratch.
40,000 units is nothing, that’s just a fraction of Corolla or Civic sales. If they can’t figure out a way to sell perhaps 150,000+ units per year, they may as well not bother selling it at all, because it will never make any money at those volumes, no matter where they build it. One can only hope that this is a toe-in-the-water move that allows them to see the results, make adjustments to move with the market, and then eventually ramp up production in the US or (more likely) a lower-cost labor market.
Isn’t Saturn getting the Astra towards the end of the current generation Opel? (I believe that the next-gen Astra is coming out on Delta-2 in 2010 or 2011) If so, why would GM order up another helping of all the non-recurring costs (panel dies and stuff) for only a couple years of manufacture? If the Astra’s a hit, all the non-recurring cost items can easily be ordered for the next-gen Astra (on Delta-2) to be assembled at Lordstown or wherever where its cost can be distributed over several years of that Astra generation.
If not Lordstown, the next generation of Opel Astra is scheduled to be assembled at several other plants (besides Belgium) anyways (the Trollhattan Saab plant being one of the locations receiving the contract for Delta-2).
This was probably a simple economic decision for GM. Could they wait another couple years to get Saturn a small competitive car? No. Could the non-recurring costs be amortized over a couple years of assembly in the US or would it be cheaper to ship them from Europe? Obviously the numbers came out in favor of importing (at least for the next couple years).
Its just more bs from Waggoner and Lutz. They will ride this ship into the iceberg. ex dealer
What I want to know, is why GM didn’t bother just bringing the thing in from Brazil, with the exchange rate and overall lower costs making it slightly more possible to break even.
See for yourselves. It’s not a bad looking car, at least on the computer screens. Plus, it’d have the “market advantage” of being flex-fuel.
http://www.globalautoindex.com/bodies.plt?no=4411&ass=&g=Chevrolet-Vectra
(Click on the photo of the car to get the next page, where you can see specs, more photos – click to photos to enlarge them)
Take note that the Brazilian “Chevrolet Vectra” is Opel ASTRA based, not Opel Vectra based.
So, wonder how many Saturn buyers would plump for a Saturn Meriva (in competition with the Scion x-box-car-things) or a Saturn Zafira (in competition with the Kia Rhondo and Mazda MX5)?
Do the imbecilic knuckle-draggers running General Messup even KNOW about these Brazilian beauties?
Couldn’t the cars be assembled in Saturn’s plant, from unassembled Brazilian kits? I daresay, YES.
This Astra import deal actually makes sense, based on several comments above. GM doesn’t want to invest in stateside production with the vehicle due for a refresh but they need something _other_ than a rebadged Cobalt (nee ION).
Why do they need such a vehicle? They need something cheap to get folks to the showroom, then they can upsell to an Aura or VUE. They’re gambling the loss of income from people who actually buy the Astra against higher volumes of showroom visitors.
If it works, the next-gen Astra can be built stateside. If not, they can rebadge the Aveo as a Saturn and try again! (heh, heh, heh)
Why the increase of 10k Astras to be imported? Likely someone was too busy polishing their golden parachute to get the original count right.
podux nailed it FTW.
The current Astra is stale bread, and sales are sliding in Europe. It’s more efficient to keep the plant in Belgium running at a higher level, than any other option. Tooling up to build this car in the US for two years would have been many times more expensive.
Triple repost, many apologies. Did you all happen to notice the “micro-El-Camino” though? GM do Brazil.
http://www.globalautoindex.com/model.plt?no=2828&ass=#
Once again, just click on the photos to make them larger, click on one of the “specs” line to get another full box showing specifications (you can even convert them to US measurements if you are like me and metric-illiterate).
glenn126:
Where is the Brazilian Chevy Vectra manufactured? Also, it appears that the Vectra is only available in a 4-door sedan; not the configurations GM wanted to bring to the states.
Does GM import anything from Brazil to the US?
I, for one, am cautiously hopeful that the Astra takes root here in the States. I’m a closet Opel fan from way back, stemming from all of the Rekords my father owned back in the 70’s and 80’s. Not that I believe in buying a new car, what with depreciation and car payments, but I will at least go look at the Astra and test drive it for memory’s sake. Unfortunately, there probably aren’t enough of us out there with fond Opel memories to buy what they are planning on selling. While I don’t see issues with a “small” 1.8 liter engine (heck, growing up in Germany, a 1.8 is almost big!), us Amis prefer bigger as better and Saturn most likely won’t try to take advantage of it’s European roots. So, the Astra will struggle to stand out, which is a personal shame for me. Gee, and I so loved my father’s 1971 Rekord with the bright red interior and hand-crank sunroof…
So they lose $4,000 per vehicle at a volume of 40,000. Doesn’t necessarily mean that is a bad decision. Depends on their production cost curve. What is the breakeven point? Would they breakeven at 60,000 or 100,000, 1,000,000 or never? Now if we had that sort of data then it would be much easier to castigate them and have a reason for doing so. I do have to admit that I’m not holding great expectations that GM has figured this sort of stuff out, …. but they might have, maybe have, could have… Ok they didn’t You win! It is a stupid idea!!
It really isn’t a bad looking car. Something like this might get me to set foot on a GM lot. If GM was smart, they’d offer it with one or more of their CDTI diesel options, and advertise the fuel economy as a big selling point. And price it slightly less than a Gabbit/Rolf with the 2.5 engine. I don’t know if it’s possible for them to do that without losing an insane amount of money, but that would also help brand loyalty.
Is this really cashflow negative? Maybe they have excess prepaid capacity in Belgium?
Sure, they lose money on each car, but the volume keeps them in business.
Seriously, jl280 makes a good point. We don’t know how much it costs GM to make an Astra, and how much of that cost would be borne even if a car wasn’t made. Auto makers have huge fixed costs, like depreciation and overhead, that go on even if an assembly line stops. Moreover, Belgium makes it very hard to cut payrolls. A powerful union may make it virtually impossible. In such circumstances, the marginal expense of making a car might be only slightly more than the cost of the steel, glass, tires, shipping, etc.
So GM may have asked its beancounters “Will we lose less money if we make more Astras and sell them in the US? And the beancounters may have replied “Yes, because the cars will contribute a little gross margin to offset some fixed costs.” (Incidentally, after Henry’s administrative staff purge in the 20’s and into the mid-40’s, FoMoCo couldn’t answer that question.)
Of course, this is not a strategy for long-term viability. But desperate companies do desperate things.
There’s lots of hidden numbers besides the $4k loss per vehicle sold. Increased production means lower unit costs. means higher profit, for the units destined for Europe. R&D would add $1-2k to any rebadged/reskinned/replaced Cobolt/Ion. Similarly tooling up costs would add $1-2k to a US produced Astra for such small production (and many parts would still need to be sourced from Europe). A 2-3 year delay in getting to the market means thousands less cars sold to service, and trade-ins to mark-up. And seeing as most customers in the target market are likely to finance, and likely to be suckered into financing through GMAC, they could probably recoup the $4k over the period of the loan.
Count me as another who wishes GM luck on the Astra project. The car doesn’t look bad and is the first GM product in a long time that I would seriously consider buying. I don’t need/want a four door, so that sporty two-door hatch will get a very close look from me when it gets here.
My interest kind of proves GM isn’t making a total mistake by bringing the Astra over to the States. The question is, are there enough of us?
I’m interested to learn what kind of reliability rep the Astra has earned in Europe. By the way, unless I’m mistaken, GM plans to close that plant in Belgium where it currrently makes the Astra when that model is updated.
Ok, someone commented that GM builds interesting cars in Brazil. And the last Brazilian car to be imported to the U.S. was the VW Fox. Also the Chevette was sourced from Brazil, and if you had one of those early-mid ’80’s Sunbirds that overheated, it came from- – – Brazil. Apparently there is no Brazilian Portuguese equivalent for “Build Quality.”
Belgium is also the country responsible for high gravity beer, and makes the best beer in the world, and chocolate, and mayonnaise on chips/fries with mussels. Not famous for making cars.
Has GM EVER made a decent small car? Look at the record, from the Corvair to the Vega, -Monza, -Cavalier, -Chevette-, Sprint, -Spectrum, -Metro, -Aveo, -Ion.
GM has an unblemished, 45+ year record of putting small amounts of crap on wheels, calling it a car, telling us, “It’s different this time.” Roger Smith is still right, you’re still better off buying a two year old Buick. They should continue making trucks and go back to making Roadmasters and other land yachts, at least someone-somewhere- wants those, they were profitable, and GM knows how to make them.
It works as long as GM regains market share. It’s a risk but with no decent small car platform to challenge Honda, Toyota, Hyundai, KIa, Mazda, Nissan, Subaru, etc..they have no choice.
Although the Opel/Aura didn’t bring in Accord and Camry buyers.
Perhaps they’re planning on jacking up the price after the first (intro) model year?