Posted by: David Welch on December 15, 2006
The good news from General Motors is that the company finally woke up and realized it’s time to stop building a handful of compact cars to go after the same market segment worldwide. Starting later in 2007, GM will bring its Opel Astra to the states for Saturn, sold as the Saturn Astra. It’s an attractive car with a sporty edge to its handling and replaces the Ion, which was back of the pack the day it was born.
It’s a smart move. GM is actually turning a profit in Europe this year for the first time in about six years. And the company is doing it despite a profit drag from its long-suffering Saab unit. Opel has come back on the strength of the Astra and the new Corsa subcompact. In truth, Opel has been making some cool cars for a few years now. The cabins have been nicer than GM’s American-engineered passenger cars. Throw in European sensibilities for driving dynamics and fuel economy and GM might be able to go up against some of the Japanese compacts.
Over here, Detroit’s three have had a history of mailing in their efforts in small and mid-sized cars. The money has been in trucks, and Motown has focused its cash and best engineering resources accordingly. Of course, neglecting passenger cars because they don’t make money is a self-fulfilling prophecy. On that score, GM and its crosstown competitors have rarely failed to disappoint.
There is one problem for GM, though. They’ll have a tough time making any money on those Opel Saturns. The company will build the car in Belgium and ship them across the Atlantic to U.S. dealers. It’s a smart use of its factories. And it saves the $500 million-plus GM would spend developing a new Saturn compact. But any American who has looked at their credit card statement after a trip to Europe knows that the exchange rate is a killer. GM Chairman and CEO Rick Wagoner said at a press event last week that “it will be tough” to make money on the Opels here.
That’s a hard slog for a company needs to boost profits and generate cash flow. But at least GM is feeding Saturn with a car that has been pretty successful in the highly-competitive European car market. The Astra has proven that it can face off with the VW Jetta and tough French competitors. But GM will have to look to other models to help shore up the balance sheet.