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Project Olympia aims to put GM back in the black

A radical top to bottom study of General Motors across all sections of the business is taking place throughout Europe as the company bids to return to profitability.

Following a major restructuring of its production facilities across the continent, which included the controversial decision to cease car production in Luton, in the United Kingdom next year as well as reducing capacity in Germany and Belgium, the company is turning its focus to other areas of business with the launch of Project Olympia.

Part of Project Olympia will see the adoption of best practice across the various European markets with Vauxhall's Network Q used car sales operation in the United Kingdom likely to be copied in other countries as they seek to achieve better returns on used car sales.

Playing a key role in the 'root and branch' study of General Motors' Opel operation is new GM Europe vice-president sales, marketing and aftersales Nick Reilly, previously chairman and managing director of Vauxhall, who took up his new role on August 1, succeeding Jeffrey Hurlbert.

Reilly will remain chairman of Vauxhall with the role being split with Kevin Wale, who since 1998 has been based in Singapore as executive director operations for General Motors Asia Pacific, becoming managing director of the Luton-based manufacturer.

'In Europe we have a lot to do,' said Reilly. 'We recorded losses in the second half of last year and started off in loss in the first half of this year.'

Project Olympia is designed to return GM Europe to profit and revitalise the brand through focusing on cost reductions across the board and grow the business by focusing on product, sales and marketing.

Numerous teams have been established to study different areas of the business and Reilly, in his new role, will be involved in many of them.

A Turnaround Board has been established to co-ordinate activities. It is co-chaired by Carl-Peter Forster, new chairman of Opel, and Pat Campbell, GM Europe's vice-president, finance, and apart from Reilly also comprises GM Europe president Michael Burns and Saab chief executive officer Peter Augustsson, as well as other senior executives.

Five core initiatives have been established as a first step:

  • Returning to a solid and profitable business situation.
  • Strengthening and optimising the sales structure.
  • Revitalising and boosting the Opel/Vauxhall brand.
  • Building on growth opportunities.
  • Developing continuous improvement processes.

    The project, for which concrete decisions are expected in September, is not unlike Ford of Europe's top to bottom restructuring which has also seen a widespread production shake-up and cost-cutting across the board as well as a renewed product focus.

    A side effect of taking production out of the UK - although the net loss will be less because of an increase in van production with the launch of the new Vivaro - is that more components will be imported, thereby increasing the logistics bill.

    Much of the focus of Project Olympia will be on Germany, where sales have slumped, but Reilly says the manufacturer will also address the needs of other countries.

    'With the new products we are working on we need to focus on how we increase our market share and with the sales we have already we need to look at how we can can improve margins,' said Reilly.

    'We spend a lot of money on promotions and marketing across Europe but we spend it in very traditional methods. We can spend less and therefore improve margins or spend it better and generate more sales.

    'We have an inconsistent performance throughout Europe with our used car activity. We can take best practice from one country to another.

    We tend to run the business from one country to another and not on a pan-European basis and we must address that.'

    He highlighted how standards varies between Vauxhall dealers in the UK and Opel dealers on the continent and said in his new role he wanted to focus on improving standards.

    'In the UK we have found very different standards despite part of the dealers' margin being tied to customer care standards.' Joint ventures accelerate new product development General Motors Europe president Michael Burns has stressed that joint ventures with rival manufacturers allow the company to get new products to market quicker.

    Speaking at the Automotive News Europe Congress in Prague, Burns said such alliances also give GM a stronger foothold in emerging markets.

    'With an alliance strategy, we can target specific product or technical expertise of a partner that will complement our existing product offerings, without having to take on the partner's assets and entire product portfolio,' Burns said.

    'This way, we avoid the burden of excess capacity and redundant products that often come as a part of the package in an acquisition. This is extremely important in an industry plagued by overcapacity.'

    Burns added: 'Alliances also work for GM because we have a lot to offer our alliance partners, so the relationship is mutually beneficial - a key to success in any alliance.'

    Commenting that alliances allow the manufacturer to get new products to market quicker, Burns cited a prime example as the Opel/Vauxhall Agila, co-developed with Suzuki and introduced last year.

    'With the Agila,' Burns said, 'Opel and Vauxhall were able to leverage Suzuki's expertise in mini-cars to accelerate its entry into the growing European microvan market - and considerably faster than it could have on its own.'

    Burns said that at least three major factors were driving force behind manufacturer consolidations.

    They are, he said:

  • The desire for a global sales footprint - to better participate in growing markets and balance regional swings.
  • The need for multi-brand strategies - to more effectively address customer needs in a world that is no longer 'one size fits all'.
  • And, importantly, he stressed, the need for economies of scale - in virtually every aspect of our business. Great examples, he added, include component and system development, research and development and purchasing.

    Burns added: 'At GM, we have a history of being big and being global, and we certainly intend to continue to be the world leader in transportation products and related services. But we also know that just being big and global is not enough in today's environment.'

    Last year, the manufacturer established a strategic industrial alliance with Fiat, which involved GM taking a 20% equity stake in Fiat Auto, and the Fiat Group taking about a 6% stake in GM.

    'The GM/Fiat Auto alliance offers many opportunities for improving our products and business results,' Burns said.

    He added: 'The primary goal of the alliance is to improve the competitiveness of both partners. In Europe and Latin America, Fiat Auto and GM are allies and equal 'upstream' partners on the cost side, where synergies through creation and execution of two joint ventures in powertrain and purchasing, representing some 80% of our industrial costs, can be realised.

    'However, the two companies will continue to be strong competitors on the revenue side, with our products and brands remaining clearly differentiated and fierce competitors in the marketplace.'

    Asked at the conference about how GM plans to return Opel to profitability Burns replied: “We had created some image issues that we have now corrected. 'We will now see significant progress. We are getting the quality right and we are getting the vehicles right.' (July/August 2001)

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