Girsky's Mission: Mining Opel

Jordan Hollender
#GM, #Opel

Queens, New York, native Stephen J. Girsky grew up in the epicenter of American car culture, Los Angeles. Now vice chairman of General Motors, in the 1990s he worked at Morgan Stanley and was one of Wall Street's most outspoken automotive analysts. With a sharp and early eye on all that was wrong with Detroit as the business limped into the twenty-first century, he formed S. J. Girsky and advised the United Auto Workers. Girsky joined GM's board of directors and represented the UAW in the 2009 bankruptcy. Girsky is on most Detroit shortlists of potential candidates to replace CEO Dan Akerson when he retires.

After the General Motors bankruptcy, Girsky helped persuade the company not to sell off Opel/Vauxhall. Since 2011, the focus of his job has been to fix the ailing European division, which has lost more than $16 billion since 1999. Girsky sacked Opel chief Nick Reilly and then his successor, Karl-Friedrich Stracke, the former GM global engineering chief. Girsky then stepped in as Opel's interim chairman and named Karl-Thomas Neumann, former Volkswagen AG China chief, as his replacement. Last year, GM signed a pact to develop small cars with PSA Peugeot-Citroën. Morgan Stanley, Girsky's former employer, still says GM ought to drop Opel. For his service, GM gave Girsky, who emphatically disagrees with ex-employer Morgan, a pay package worth $5.3 million. We caught up with Girsky in his office at the GM Building on New York's Fifth Avenue.

KITMAN: Senior GM people say [former CEO] Rick Wagoner thought Opel should be sold. Others say he simply didn't want to go before the U.S. government with hat in hand and say, "We've got to save the jobs of these German trade unionists."
GIRSKY: I supported keeping Opel for three reasons. A global company must compete in one of the biggest markets in the world, Europe. Two, Europeans are among the most sophisticated auto consumers in the world. They have very high CO2 standards, rising performance standards -- you need to be able to satisfy those customers if you plan on winning anywhere in the world. Number three, Europe provides scale for global platforms. The naive answer is, "Let's just throw the keys on the table and walk away and our earnings are automatically two billion dollars better." Opel provides scale for platforms and engineering resources for platforms developed there. [Opel] has a mind-set of losing; they've lost [market] share for fifteen years. They've lost billions. And, frankly, they're disconnected from the rest of the organization.

K: GM North America lost share for many years, too.
G: And GM went bankrupt. So, there was a catharsis at GM. The question was: what was the catharsis at Opel, and how do you draw a plan to fix it? We sell a million cars a year with this brand. Opel/Vauxhall is the second-largest GM brand after Chevrolet. Vauxhall in the U.K. is the fastest-growing brand at retail and was number one in commercial vehicles for the second year in the 110-year history of the automotive branch of the company last year. The [Vauxhall] Insignia outsells [VW] Passat and [Ford] Mondeo, I think two to one, at retail in the U.K.

K: Were they ever really going to sell Opel?
G: The sale got very close. The board became more comfortable that the U.S. situation was stable. Really, what happened [is that]GM ran out of money. The government was funding us but wanted the money to stay here . . . The easiest thing to do was, "Let's take this piece and sell it off to somebody else, and this piece will go somewhere else." I don't think anyone really thought through the big picture here.

K: The Opel engineering team makes the closest GM has to world-class small and mid-size cars -- the Chevrolet Cruze is evidence -- and you were going to cut them loose?
G: There was so much effort on getting out of bankruptcy that, near term, they were looking at stabilization. The tricky part is, the board keeps Opel and then Europe's economy keeps going down the tubes. The irony is if you covered up the names and said one region is going to spend their way out and another region is going to save their way out, you wouldn't say the U.S. is going to be the one spending.

K: Stimulus spending ought to help the auto industry?
G: They're trying to do [in Europe] what they've got to do -- Spain has just done a little cash for clunkers. But -- and I'm not criticizing them because they didn't have the latitude -- you only have a certain number of tools in your tool kit, right? We had more over here than they had over there. Now, Germany has some more tools in the tool kit, but the amount of tools they've got to use is also a function of how much help they have to provide to the rest of Europe.

K: What are they going to do when Opel has to shut factories? It's like the Germans have a different standard for the rest of Europe.
G: Opel is not Audi, and we can't afford to pay like them . . . I can understand pattern bargaining, [like] when GM, Ford, and Chrysler had 85 percent of the market [the three had the same labor deal]. When the three have 45 percent of the market it's a different story, because Hyundai doesn't follow your pattern. And BMW in South Carolina or Mercedes in Alabama, they don't follow your pattern. And Spain doesn't follow the German pattern, and the U.K. doesn't follow the pattern, either.

K: How is it that Mercedes, BMW, and Volkswagen are so strong?
G: They've been able to move their brands up over time. Opel has not. Opel has been arguing so much with their unions and the press that the brand's done nothing but go down. We're going to work with Opel to more aggressively attach to the bigger GM scale, and when there are regional benefits, we'll work with PSA...We're a six, eight percent [market] share company. Add [Chevrolet in Europe and PSA], together we have eighteen. Peugeot is very good at operating in a resource-constrained environment because they've done that before. We have not operated in a resource-constrained environment, so there are things we can learn from them.

K: Modern European cars seem more relevant to the U.S. market than they once might have been.
G: The big debate is, will [the two markets] converge? Europe is crowded, dirty, and resource constrained, and that's how the car companies need to operate. Everything is shrinking over there. Light commercial vehicles are becoming more mass- and space-efficient. Here, we didn't have that problem. We still used a lot of big stuff. The fact that we're bringing some of this stuff over here from there has raised an interesting question, because I think things like mass and CO2 and space efficiency are becoming much more important here.

K: It seems Ford sells a lot of Transit Connects --
G: It's not lost on us. We have van partnerships with Renault and Fiat in Europe.

K: I love the Cruze.
G: I love the Cruze, too. At dinner with [Roger] Penske one night, he says, "You're really missing it on the diesel. The Germans are selling a lot of diesels here; talk to [GM North America president Mark] Reuss." And I said, "Well, we do diesels in Europe. So why can't we do them here?" [Former GM vice chairman Bob] Lutz didn't think diesels would work here.

K: Lutz has been wrong on occasion.
G: The PSA guys drove that Cruze diesel [at GM's Milford, Michigan, proving ground], and they thought this was one of the best-executed cars they'd seen in a long time. You ask the [GM] guys, "Well, how many do you think you can sell?" I'll make up a number: 5000. And then you go back to them a year later when the car's looking really good and fuel economy is good and Volkswagen sold 80,000 [diesels] here last year. "Well, how many do you think you can sell?" "5000." Come on. You guys are killing me.

K: How did no one at GM see the bankruptcy coming?
G: There was a view at GM that the turn was always right around the corner. When you rely solely on trucks, you're disrespecting the customer and half the market. We've got to be able to make money across the product range, and it can't just be, "Well, we'll sell a few cars and make a lot of money on trucks." If you don't have discipline around that, it's not going to work. We still have work to do, and I think the bankruptcy was a humbling experience...the company wants to be aggressive about not repeating that and have a much bigger view of what it takes to win.

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