Thursday, December 24, 2009
Report Says Opel May Have to Slash European Prices by 40% to Raise Output and Save Jobs
Sounds insane but General Motors' European division, Opel and its sister brand Vauxhall, may have to make huge discounts on their models in order to sell enough cars to save jobs in Germany and meet the terms of the €1.5 billion or $2.07 billion US short-term loans promised by Berlin. Simon Empson, managing director at Broadspeed.com, a UK based website that sells cars, told Bloomberg news that Opel and Vauxhall may even have to slash prices by a whopping "40 percent or more" to meet their sales targets.
Several analysts agree that due to the nature of the deal, Canadian auto-parts maker Magna International, which is leading a group of investors negotiating for the acquisition of the Opel brand, may very well focus on raising production rather than on generating profits.
This of course could lead to a devastating for many companies, price war in Europe. "Everybody is looking to generate cash, and the quickest but not necessarily the most effective way is to discount," told the news agency, Stefan Bratzel, director of the Center of Automotive Research at the University of Applied Sciences in Bergisch Gladbach, Germany. "Peugeot, Renault and Ford need to make sure they don't fall by the wayside."