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GM struggles to overcome Chevrolet and Opel rivalry

Two cars of the 'people mover' public rail are seen covered with a advertisement for the 2014 Chevy Silverado pickup truck as they move past
Two cars of the 'people mover' public rail are seen covered with a advertisement for the 2014 Chevy Silverado pickup truck as they move past

By Christiaan Hetzner

GENEVA (Reuters) - When Geneva taxi driver Boulbaba Ben Hassine took his Opel Zafira MPV back to the dealership for maintenance, a salesman tried to sell him a Chevrolet Cruze station wagon.

"It's a nice-looking model but far too thirsty, so I said no," the 64-year-old said. "I only went in to change the spark plugs."

Both Opel and Chevrolet are owned by U.S. carmaker General Motors and Ben Hassine's experience is symptomatic of a rivalry that has developed between the two brands and risks damaging both.

Chevrolet is General Motors' (GM) largest and most important brand worldwide, selling roughly 5 million cars last year alone.

It plays a crucial role for the group in every major market except one - Opel's home turf of Europe. Opel outsells Chevrolet around five-to-one in the European Union, a region that contributes only around 4 percent of the U.S. brand's sales.

When GM first rebranded Korean-built Daewoo cars in Europe with the Chevy bowtie eight years ago, the plan was to market them as no-frills versions of sportier, more innovative Opels.

But panned by critics and hurt like the rest of the industry by a brutal downturn in European demand, Chevrolet has responded by slashing prices and introducing more upmarket models - putting it on collision course with its sister brand.

At the Geneva car show this week, Chevrolet threatens to steal the limelight from Opel's upscale Cascada soft-top by unveiling its sleek new Corvette Stingray convertible only a short distance away.

With Opel itself reeling from over $1 billion of annual losses and mired in a painful round of job cuts, the last thing it needs is Chevrolet using cutthroat sales tactics to muscle into Europe with the help of Opel's own dealers.

"Other carmakers have proven brands can coexist under one roof, but we had the feeling that the two tried to take customers away from each other," said one GM car dealer in Germany, who sells both brands in his showrooms based in the industrial Ruhr region.

GM recognizes the problem, and says it is already fixing it.

"We don't want to have a Chevrolet right next to an Opel anymore and our entire product strategy is geared towards more clearly differentiating Opel models from their Chevrolet counterparts," a senior GM manager told Reuters on condition of anonymity, adding this included a stronger focus on exclusive showrooms for both brands in future.

"It's a strategy coordinated across the entire group and signed off by (GM Chief Executive Dan) Akerson himself."

But some analysts remain to be convinced the company can change its ways and create clearly differentiated brands.

"GM doesn't have a brand strategy, it has a sales strategy," said Ferdinand Dudenhoeffer, head of the CAR auto industry think tank based in Duisburg.

"HARD TO FATHOM"

Part of GM's problem is that it is far from clear it has addressed the issues which have led high-fuel consuming Chevies to be shunned in a cash-strapped, urbanized Europe.

The brand has quietly buried targets from 2010 to double sales in Europe by mid-decade. In fact, its volumes have barely budged, hovering around 200,000 cars ever since Daewoo was reborn as Chevy in 2005, and its market share has crept up just 0.2 percentage points to 1.4 percent over the past eight years.

Nor has 2013 started well, with Chevrolet sales in Europe plunging 39 percent in January to less than 10,000 cars. Opel sold six times as many cars that month, helped by the arrival of its Mokka.

Experts question whether even Chevrolet's limp sales are an accurate reflection of underlying demand, since the brand engages heavily in common industry practices that artificially inflate volumes.

Chevies are regularly among the top ten cars discounted directly by the manufacturer in Germany, according to a monthly rebate index published by CAR. Zero-money down, zero-interest rate deals like "Chevrolet Family Weeks" offer customers the equivalent of close to 30 percent off the sticker price of a Chevrolet Spark.

Data collected by Frankfurt-based Dataforce also show that every other new Chevrolet in Germany, the brand's second largest European market, was registered last year to a dealer or to GM itself, rather than directly with a customer. These new cars are ultimately sold as used at sharp discounts.

By comparison, Opel refrains from manufacturer rebates and its share of so-called "self-registrations" came in close to 10 percentage points lower at less than 40 percent.

But that creates potential problems for Opel.

"Who wouldn't walk into an Opel showroom looking to buy a Mokka SUV and drive off instead with its Chevy Traxx equivalent that's 2,000 euros cheaper?" asked Christoph Sturmer of researchers IHS Automotive.

"Chevrolet's plan in Europe is hard to fathom from the outside, since it is a lot about internal politics," he added.

Chevrolet Europe President Susan Docherty refutes the notion her business cannibalizes sales of Opel, arguing her customers can only choose from three basic option lines and aren't privy to the same levels of customization that an Opel buyer enjoys.

"You get to pick your engine, for instance and then maybe you can pick a sunroof and navigation, but that's it," she told Reuters in a recent interview.

"If someone goes over to the Opel side of the showroom, what they really notice is that we equip things differently."

(Additional reporting by Laurence Frost in Geneva and Ben Klayman in Detroit; Editing by Mark Potter)

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