After Investing $600+ Million In Europe, Chevrolet Abandons It
Just as Chevrolet bowtie logos are slated to appear on the Manchester United soccer team’s jerseys, Chevrolet is beating an ignominious retreat from Europe, according to a December 6 Marketing Daily report.
Chevrolet’s parent company, GM, paid more than $600 million in 2012 to put them there starting 2014 – including a $100 million “activation fee” just for being able to call the brand the team’s global automotive partner, whatever that means.
It seemed like a good idea at the time
Even though nobody in Europe could buy a Chevrolet at the time, and even though former wunderkind global CMO Joel Ewanick got fired because of the deal, GM thought it would be a great vehicle for combining its Opel, Vauxhall and other makes most Americans have never heard of under the Chevrolet nameplate.
Now, one year and a 17 percent sales decline later, Chevrolet is keeping the deal but abandoning Europe – and taking a $700 million to $1 billion write-down in the process. Go figure.
This decision was not part of senior management’s ongoing efforts to discredit and eliminate every last vestige of Ewanick’s marketing legacy, but the result of their own greedy cheesiness.
Spitting in the soup
When it came to bringing Chevrolet cars to Europe, Government Motors, like its biggest shareholder, badly botched the rollout.
For one thing, notes the UK publication Marketing Week, the Man U deal didn’t work.
The automaker’s football-themed activity has struggled to accelerate European sales over the last 12 months. Chevrolet revenue dropped 17 per cent in the 10 months to 31 October, while sales of Opel and Vauxhall cars declined 3 per cent.
For another, they chose the wrong cars to sell as Chevrolets. Instead of choosing models reflecting a “name that’s associated with large US road cruisers,” explains Hanover, Germany-based Nord LB analyst Frank Schwope, they “re-badge[d] cheap Korean cars with the Chevrolet name.” This, he says, “was a strategic mistake from the beginning.”
The cheap cars in question – 186,000 exported to Europe – came from GM Korean subsidiary Daewoo. These, notes Automotive News,
were supposed to compete at the budget end of the market with the likes of Hyundai, Skoda and Renault’s Dacia. But the brand failed to make much headway as its largely rebadged Korean-made Daewoo cars struggled against rivals, whose models are customized for European markets.
Talk about spitting in the soup.
Twisting in the wind
In addition to eliminating 20 percent of the Daewoo plant’s output, Chevrolet’s retreat creates something of a problem for some 1,900 European Chevrolet dealers. Just months after flying 250 of them to Detroit to hear speeches and tour the GM Heritage Center to understand Chevrolet’s history and product line, the company’s now leaving many to twist in the wind. About half sell Opels, so they may get off with just absorbing physical rebranding costs such as new signage. As for the others, who may end up with no new cars to sell, Chevrolet Europe president Thomas Sedran said GM will “work with individual dealers to determine their future.” That’s no doubt very reassuring.
Putting on a happy face
Even though the whole rationale for the European soccer deal has disappeared, Chevrolet will be sticking with its full nine-year term. “The Man-U deal isn’t so much about where they’re based but about the Man-U brand,” said Chevrolet global CMO Tim Mahoney, “and some people would say that they have ‘Super Bowl Sunday’ every time they play.” In Europe. Which Chevrolet is pulling out of in 2015, year three of a nine-year deal.
If you think that sounds like whistling past the graveyard, get this:
GM Chairman and CEO Dan Akerson calls Chevy’s withdrawal from Europe “a win for all four brands. It’s especially positive for car buyers throughout Europe, who will be able to purchase vehicles from well-defined, vibrant GM brands.” (But not so positive for those European dealers and Korean factory workers.) “Europe is a key region for GM that will benefit from a stronger Opel and Vauxhall and further emphasis on Cadillac,” he added in a prepared statement.
But eliminating what vice chairman Steve Girsky calls a brand that “never connected with European buyers” won’t necessarily help the remaining ones, which weren’t so hot at connecting with European buyers themselves.
While dropping Chevrolet from the European product mix “eliminates some competition from one of their own brands,” explained Bankhaus Metzle analyst Jurgen Pieper, “we need to keep a sense of proportion: Chevrolet has never been very successful in Europe, and there’s no guarantee Opel will automatically get its market share.”
While one GM brand may be leaving Europe, the management style lingers on. “Volkswagen successfully manages four similar marques in Europe — VW, Skoda, Audi and Seat,” Schwope noted, “yet GM isn’t able to make one [brand] profitable in the region.”
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