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GM: How the collapse of the car maker impacts fleet

Date: 15 June 2009

The worldwide car market is in a state of upheaval, and nowhere is this more evident than at GM. But how will it all impact UK fleets? Rupert Saunders reports

Fleet and business car customers appear to be sticking with Vauxhall as the GM Europe brand goes through turbulent times and a change of ownership.

Vauxhall fleet sales to end of May were down by 30%, but that is in line with the market as a whole. The Insignia has had a successful launch, racheting up over 10,000 sales since January, Corsa fleet business is running ahead of last year and only the Astra, which is due for replacement later this year, appears to be suffering.

However Vauxhall is not the only carmaker to be facing a crisis, and businesses do appear to be taking a more cautious approach to other, less mainstream brands. Sales to fleets for sister brand Saab have more than halved this year, while ChryslerJeep (never a big fleet player) has sold only just over 700 business units in the first five months.

Vauxhall bosses have been keen to emphasise it is "business as usual" while the change of ownership takes place. It now seems likely that a consortium, led by international component company Magna, will take a majority stake in both Vauxhall and Opel - with an agreement in place by July and the deal finalised by September. Meanwhile, Chapter 11 bankruptcy protection for the parent company in the USA does not affect overseas subsidiaries, which should continue to trade normally, though there may be some question marks over suppliers.

Carl-Peter Forster, GM Europe CEO, wrote to all dealers, suppliers and major business customers on the day the Chapter 11 protection was declared, assuring them that warranty and customer support would not be affected.

"We have given major fleet customers the confidence that everything is in place - warranty, cars, parts, dealers - to keep the business rolling until Magna get their feet under the table," said a GM spokesman. "Only then will we know what the business focus is going to be."

That message appears to have been well received. Major contract hire companies BusinessCar spoke to, while not wanting to be quoted, said there was no sign of end users turning away from the brand. Most importantly, demand for used Vauxhalls, and therefore residual values, appears to be holding up.

"At the moment there are no signs of a lack of confidence affecting values," said Mike Hind of RV expert CAP. "Our analysts would only make an adjustment to predicted future values if there was any movement in the market and there is no evidence. We are watching it and things might change - but we have not seen anything at the moment."

Magna executives visited Vauxhall plants in the UK as part of the due diligence process and there are reports that the new owners are considering revamping the product line-up and rethinking its volume sales strategy. Magna CEO, Siegfried Wolf, has been quoted as saying Opel "has lots of new cars in the pipeline" and he wants to examine that very carefully before putting forward a business plan.

Whatever happens, the Vauxhall brand is likely to survive, despite speculation the Opel badge could replace it in the UK, as it has with the rest of Europe. Jay Nagley, marketing expert from Spyder Automotive points out that, while one European brand might make sense in the long term, the short term cost of rebranding is "enormous".

"It would be very easy for people to misunderstand a rebranding," he commented. "The message would be that Vauxhall is closing and Opel is taking its place. But, in the present climate, people might just hear the bit about Vauxhall closing down.

"They would have to spend a huge amount to establish a new brand and, with so much demand on cash in the short term already, it's highly unlikely."

Meanwhile, GM Europe is cutting Saab adrift as a separate company and, reportedly, there are three potential buyers in the frame: Koenigsegg, the Swedish supercar maker; Renco, a private holding company, and a third group of investors from the US state of Wyoming. Of these, it seems likely that Koenigsegg would find favour with the Swedish government, but whether it genuinely has the financial muscle to absorb Saab remains to be seen.

And let's not forget Volvo. Ford put the Swedish subsidiary up for sale last year as part of a strategic review and, after a flurry of interest, things have gone quiet.

Ford financials for the first quarter showed a $700 million impairment charge against Volvo after it was classified as "held for sale", which implies that there is a probability of a sale in the next year. Meanwhile Volvo sales to fleets in the UK are actually running ahead of the market - suggesting that business car managers, like the rest of us, have actually forgotten how much difficulty the company is in.



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