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Last Updated: Wednesday, 29 September, 2004, 08:15 GMT 09:15 UK
GM puts US models to work in Europe
By Jorn Madslien
BBC News Online business reporter at the Paris Motor Show

Cadillac STS
The Cadillac STS is put to work where Saab failed to deliver

By displaying an American luxury car at the Paris Motor Show, the world's largest car maker General Motors (GM) has made it clear that it is desperate to gain a foothold in Europe's executive car market.

The hope is that the Cadillac STS will eat into the lucrative market segment which is dominated by the likes of Mercedes E-Class and the BMW 5-series.

"It positions Cadillac in a segment it has not previously competed in," said GM's vice chairman Bob Lutz.

"We've paid extreme attention to detail," Mr Lutz added, insisting that driving the STS is a "silent, refined experience".

The car will come with both a V6 and a V8 engine, but crucially, it will not initially come with a diesel engine which is popular within the segment it is targeting.

This could well hamper its success, though over time Cadillacs with diesel engines are due to arrive.

Squeezing Saab

General Motors has been struggling for a long time in the executive car market in Europe, essentially because its only contender, the Saab 9-5, has failed to make significant inroads.

GM Chairman and Chief Executive Rick Wagoner at the Paris Motor Show 2004
Wagoner: "If you have the right product you can build it in different places."

The arrival of Cadillac suggests that GM is preparing to scale back its ambitions for Saab in Europe.

This would be in sharp contrast to its efforts in the US where Saab is seen as a luxurious European marque.

"Saab appears to be concentrating on the US market after launching two models, the 9-2 and the 9-7, exclusively in the US," observed the industry magazine Automotive News Europe.

"Saab dealers want those models for Europe, but so far Saab has refused."

Uncertain future

Saab's relative unpopularity in Europe has sparked speculation about the future of its Swedish factory.

One suggestion is that GM might move the production of at least one Saab model from Sweden to its Opel factory in Russelsheim, Germany.

The chairman of GM Europe, Fritz Henderson, launches a Chevrolet at the Paris Motor Show 2004.
Henderson: "We're going to focus on one brand, a single brand, across Europe."

"In today's world, if you have the right product you can build it in different places," GM chairman Rick Wagoner told BBC News Online.

GM says it will decide by the end of this year which of its European models should be produced where.

Such talk has raised concerns about the future of GM's European operations, in particularly the Saab factory in Trollhaettan, Sweden.

The Saab 9-3 already shares a platform with the Opel Vectra and the Opel Signum models and as such would be a strong contender for a move, though a reverse shift of Opel models to Sweden could be an alternative way forward.

Either way, significant capacity and job cuts are expected during 2005.

New badge

But GM's efforts to shake up its European operations do not stop there.

GM Daewoo stand displaying the Chevrolet Kalos at the Paris Motor Show 2004
Chevrolet will become a global brand

Another part of its struggle to bounce back after five year's of losses is a decision to rename Daewoo cars as Chevrolets.

"We're going to focus on one brand, a single brand, across Europe: Chevrolet," declared the man given the responsibility of overseeing the changes, GM Europe's new chairman, Fritz Henderson.

Launching the Chevrolet S3X compact sports utility vehicle at the Paris show, Mr Henderson stressed that the marque's main presence in Europe would be in the segment for small and medium-sized family cars.

The Chevrolet badge should help double sales of GM Daewoo cars, most of which will enter exactly the segment targeted by Opel and its UK cousin Vauxhall, creating unwelcome competition for its sister brands.

Distraction

But GM's problems in Europe stretch beyond its 100% owned subsidiaries.

GM alsohappens to own a 10% stake in the troubled Italian car maker Fiat Auto.

GM vice chairman Bob Lutz at the Paris Motor Show 2004
Lutz: "[The STS] positions Cadillac in a segment it has not previously competed in."

The industrial giant Fiat Group owns the remaining 90%, and in January next year a put option that would allow it to force GM to buy the entire Fiat Auto becomes effective.

The put option was negotiated in 2000, at a time when Fiat Auto seemed attractive.

GM now insists recent restructuring moves of Fiat Auto have rendered the option invalid.

Either party could bring the matter to the courts early next year, but this seems unlikely since both depend heavily on cooperative agreements and on goodwill from consumers and politicians.

But regardless of whether or not a massive fight breaks out between GM and Fiat; the issue is bound to distract Mr Henderson as he struggles to sort out the rest of the company's business in Europe.


SEE ALSO:
Lifting the lid on GM's strategy
04 Mar 04  |  Business
Fiat Auto's delicate recovery
08 Mar 04  |  Business
Fiat picks new chief executive
01 Jun 04  |  Business
Why Nissan chose to stay in the UK
24 Sep 04  |  Business
Paris gears up for motor show
23 Sep 04  |  Business


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