Opel puts all its European dealers under notice

Opel and its British offshoot Vauxhall has begun a massive shake-up of its dealers by placing its entire European network under a termination notice. The notice begins a process that would see the Opel or Vauxhall franchise removed from all dealers by April 2020, unless they renegotiate terms.

Speaking in the UK, Stephen Norman, the managing director of both Vauxhall and Opel Ireland, said that the decision did not mean that redundancies nor franchise terminations were imminent, but that "we're terminating all of the current contracts with two years' notice with effect from April 30th this year. Then, obviously it's different by market, but in the vast majority of cases we will be proposing in the next few weeks new contracts to the majority of those retail dealers who are currently with us."

Quite what this means for the Republic's 30-strong Opel dealer network is a touch opaque at the moment. Gillian Whittal, recently announced as Opel Ireland's general manager, confirmed that the shake-up was taking place, but refused to speculate on whether it would result in a smaller network.

"Firstly, our dealers are, and will remain, our primary route to market and point-of-contact with our customers," Ms Whittal told The Irish Times. "A fundamental part of this is Opel's retail distribution plan. Our contracts outline how we do business with our dealer partners, and are the basis for our retail distribution strategy into the future.

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Contracts

“The contracts will be adapted and will affect our retail distribution strategy rather than the number of dealers. The changes to the contracts will focus on three things; the sales performance of our dealer partners, customer satisfaction and the changing consumer behaviour we will see in the next few years.

“We, Opel, are becoming simpler, quicker and more innovative in the way we work with our dealer partners. Also by combining the agility of Groupe PSA with Opel’s German heritage, Opel’s product offering is also becoming more competitive. So in essence, I would say that we are embarking on a strong future together with our dealer partners, with a more competitive go-to-market strategy,” said Ms Whittal.

According to Reuters, the Vauxhall dealer network, which currently numbers 300 outlets, will one trimmed by as much as a third.

The shake-up of the dealer network is part of the broader "PACE" plan, enacted by PSA Group when it bought out Opel from its former owner General Motors. PACE (an acronym that translates roughly as Profitable, Electric, and Global) foresees Opel's break-even production number falling to 800,000 cars a year, reducing its costs by around €700 per car; to add electric or hybrid models to all its model ranges by 2024; and to return to profit, with a recurring 2 per cent margin, by 2020.

Sharing

Many of the savings on which this plan is contingent will come from the sharing of technology, engines, chassis and parts purchasing with PSA Group's other brands – Peugeot, Citroen, and DS – but clearly some is going to have to come from other quarters, and doubtless distribution and dealer costs will be high on the list.

Putting the pressure on both dealers and Opel as a company are tumbling sales. Vauxhall has seen its sales fall 22 per cent in the past year, while Opel’s Irish sales are down 34 per cent so far in 2018, and that in spite of the introduction of critical new models such as the Crossland X and Grandland X, and the new Insignia.

According to Mr Norman, “each and every one of these cases will be subject to individual negotiation. Nobody is being sacked”.

“The profitability of the network is positive in quarter one last year and the full year last year, but the amount of money being made is – in our opinion – insufficient. As things stand today, we want to protect the profitability of the franchise as time goes by.”