Strategy Case Study - Vauxhall/Opel restructuring

A2 students who are looking at the strategies adopted by the car industry through the recession should find plenty of useful information in this article about General Motors, owners of Vauxhall/Opel.

Last year, in the wake of the huge falls in global demand for the car industry, GM was planning to sell off Vauxhall Opel in Europe. However in November they agreed to restructure the business instead. This has led to wide-ranging changes which cover several aspects in the A2 syllabus:

Firstly, agreements have been reached with workers across Europe, represented by the Unite union in the UK, to cut costs and alter work arrangements – plenty of application of employee/employer relations here, particularly as a contrast to the difficulties between Unite and BA
- 519 jobs will go at the Vauxhall Luton factory and head office, with cuts to the UK pension scheme as well
- Workers at Vauxhall’s plants in Ellesmere Port and Luton have agreed to a two-year pay freeze, which will save £23.1 million
- In Germany at Opel a pay freeze has also been agreed, along with cuts to holidays and bonuses.
- Up to 4,000 jobs are lost in Germany with cost savings of 177 million euros

In return, the company is restructuring and streamlining operations
- Vauxhall is currently in talks with Renault to build the next-generation Vivaro as a joint venture at Luton – an example of integration within the industry as well as joint venturing
- Vauxhall’s Ellesmere Port plant will become the only plant manufacturing the Astra model later this year – an example of retrenchment, improving capacity utilization and cutting fixed costs in order to break even
- Opel plans to invest in the development and manufacture of a new small car to replace the Corsa model – an example of investment as a strategy in a recession, new product development, product life cycle, and application of the strategy models of Porter and Ansoff

Opel/Vauxhall’s chief executive Nick Reilly said the European agreements with workers were “important steps” in the process of creating a new sustainable company.
“Employees demonstrated that they are ready and willing to contribute to the company’s future when they are offered security and long-term prospects in return,” he added.

For more background on strategy in the car manufacture industry there are plenty of links from this story to others, including
Renault/Nissan/Daimler 3-way tie up
European car sales fall in April
GM sales rise as US economy picks up
Land Rover sales rise boosts Tata
Toyota investing in Tesla