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Adam Opel AG holds the view that there simply is no alternative to internationalizing the company's activities. Only as a global player with strong sales and distribution networks as well as local manufacturing and assembly facilities in the world's markets will the brand be able to sustain successful, long-term growth.
Adam Opel AG ranks among Germany's largest car manufacturers. Wholly owned and operated by the American automotive giant General Motors Corp., Opel was founded in the mid-19th century to make sewing machines. The company turned to the manufacture of automobiles in the earliest days of the industry, producing popular cars that were available to the common man. Opel survived the devastation of two world wars to prosper during the auto boom of the 1950s through 1970s, only to experience difficulties later as the market moved toward smaller, more economical cars. Rejuvenated in the early 1990s via factory upgrades and fresh new car designs, Opel became "the centerpiece of General Motors' international strategy."
Mid-19th Century Origins
The company was founded in 1862 by Adam Opel in Russelsheim-am-Main, Germany. Against the wishes of his father, a locksmith, Opel formulated a plan to manufacture sewing machines. After working in Paris to learn his trade as a journeyman, he returned home to open a workshop in his uncle's cow stables. His first handcrafted machines sold quickly, and Opel's fledgling business flourished. By 1868 it had grown prosperous enough for him to rent space in a factory building.
With the success of his business, Opel was able to turn his attention to starting a family, and he and his wife Sophie had five boys. As they grew, Opel's sons developed an avid interest in bicycling, and Opel purchased five of the machines for his family, over the objections of his wife. Observing his son's bicycles, Opel realized that the high, three-wheeled mechanisms could provide a new mode of transportation, as well as an additional source of revenue for his factory. The first bicycle left the Opel works in 1866 and before long the Opel factory was turning out 16,000 bicycles a year. The popularity of the Opel bike was enhanced by the fame of the five Opel sons, who won hundreds of bike races across Europe.
Second Generation Leads Firm into Auto Industry
Adam Opel died in 1895, bringing to an end the first era of the Opel firm. Inheriting the business, his five sons looked to modernize, turning to new products in order to maintain the company's competitive edge. The men set their sights on the automobile, one of the latest products to be developed.
To obtain the expertise needed to convert their production line from bicycles to cars, the brothers hired Friedrich Lutzmann, a famous inventor and master metalworker previously employed by the court of Dessau, in 1894. Five years later, Lutzmann produced the first Opel automobile, a coach-like vehicle with a one-cylinder rear engine and a maximum speed of 20 kilometers per hour.
By the turn of the century, the Opel factory was producing six different auto bodies, all of which were labeled with "Opel Patented Lutzmann Motor Wagon System." Lutzmann left the Opel firm in 1901, joining forces with the pioneering French automobile firm, Darracq, and Opel and Darracq entered into cooperation. The French firm supplied engines, which were shipped to the Opel works in Russelsheim, while Opel manufactured auto bodies, combining them with the French parts for sale under the name Opel-Darracq.
The first car built entirely by the Opel brothers went on the market in 1902. The compact Tonneau had a two-cylinder engine that was upgraded to four cylinders within a year. During this time, Opel cars were winning races in Germany, France, Belgium, and the United States, bringing fame to the company name.
Since each car produced by the Opel factory at this time was extremely expensive, it was available to only a small segment of the population: in 1906 the company's top-of-the-line luxury touring vehicle was priced at DM 22,000. In an effort to broaden their customer base, the brothers decided to build a less expensive form of transportation. Soon motorized two-wheel bicycles were rolling out of the Opel factory. A line of more affordable cars was also introduced in 1908. Half the size of a larger four-seater, the 10/18 PS cost just DM 8,500. The following year, the company introduced what would become its famous "Doctor Car." With a four-cylinder, eight horsepower engine, the car cost just DM 3,950. In addition to an autobody crafted by hand, the car featured standardized tire rims, which, for the first time, made it possible to change a punctured tire easily. Purchased by many lawyers and country doctors, the car was rugged enough to withstand poor rural roads, and the Opel factory received many letters of appreciation from satisfied new automobile owners.
The company continued to upgrade its product, introducing new, more aerodynamic, torpedo-shaped auto bodies. At the factory, division of labor was introduced as engines and auto bodies were mixed and matched according to size, and parts were standardized and made interchangeable. In 1911 the Opel brothers broadened the company's offerings further when they began to manufacture four-cylinder engines for airplanes as well as a four-cylinder, motorized agricultural plow.
In August 1911, the Opel factory was consumed by flames. In the wake of the fire, which struck in particular the portion of the plant where sewing machines were still being assembled from individual parts, the Opel company exited the sewing machine business, having produced more than a million of these devices. A newly rebuilt factory was completed in time for the company's 50th anniversary in 1912.
To commemorate its half-century in business, Opel introduced a new flagship automobile, to succeed the Doctor Car. With a four-cylinder engine, this car garnered even wider popularity, and was followed two years later by a new model that was given the nickname "Puppchen," or little doll. With more than 3,000 cars manufactured in one year, Opel became the largest automaker in Germany.
World War I and its Aftermath
Germany entered World War I in August of 1914, and Opel's production was converted to provide material for the armed forces. The company manufactured trucks for the war effort, producing in particular a three-ton truck. For the first time, many parts were standardized, allowing them to be taken from one truck and used to fix another. Since 2,500 Opel men--a large part of the factory's work force--were conscripted into the army and sent off to war, women and prisoners-of-war were used to operate the plant. As the war progressed, Opel experienced extreme shortages of resources, including rubber, and by 1915 the factory was turning out trucks with iron wheels.
The war affected the Opel family in ways that extended beyond the business. The youngest of the Opel brothers died in battle. In 1917 the surviving brothers were made knights, and the following year, the family was given the right to add the noble prefix "von" to their names.
In the wake of Germany's defeat, the Opel factory was occupied by French troops in December of 1918, who surveyed production closely, controlling the plant's output. The country's strained economic circumstances increased demand for cheap transportation, and Opel began to build and sell more bikes and motorcycles. In 1919 the company began to market a bike with an accessory motor, which attached to its side. Production of automobiles resumed that year, though at a slowed pace given the low demand.
In the early 1920s Germany suffered hyper-inflation, which quickly consumed the capital of the middle class. Under these conditions, Opel's cheapest car in 1922 sold for DM 225,000, an astronomical sum out of the reach of almost all consumers. In 1923 Opel was compelled to print its own emergency money with which to pay its worker's salaries, and finally, in August, the plant was forced to close.
Facing this crisis, two of the Opel sons traveled to the United States to learn about modernized car manufacturing methods, particularly the assembly line technique perfected by Henry Ford. They returned convinced that this was the key to rapid car manufacturing in the future, instead of the piece work method currently practiced in Germany. A 45-meter-long assembly line was installed in the Opel factory, and in the spring of 1924, the first car rolled off this line. Called the "Country Frog" because of its standard green color, this sturdy two-seater featured a directly-operated transmission.
Opel sold more than 100,000 of the Country Frogs throughout the 1920s. From 1924 to 1928, the company steadily reduced the prices of its products until the cost of the company's cheapest car had sunk below DM 2,000 at the end of the decade. In addition to possessing 37 percent of the German market, Opel was the country's largest exporter.
Acquisition by General Motors in 1929
In March 1929 Opel formalized its contacts with the U.S. automobile industry when General Motors (GM) purchased 80 percent of the company's stock. Two years later GM acquired the remaining 20 percent of Opel. In 1932 Opel increased its geographic reach when it opened manufacturing facilities in China, Japan, South America, and India.
The company also continued to expand its model lines. In 1931, Opel rolled out a new line of trucks, called Blitz, after a contest was conducted to find a name. Four years later, the company introduced its Olympia model at the Berlin car show. Using techniques developed for airplanes, this car had a detachable autobody, which could be separated from its engine block. Two other models added in the next few years, the Kadett and the Kapitan, which was designed for use on the newly constructed Autobahn, contained this feature.
In 1935 Opel opened a second factory, in Brandenburg, in eastern Germany. Four years later, Germany entered the Second World War, and Opel's main plant, in Russelsheim, which had produced over one million cars, was converted to wartime use, making cockpit covers and fuselages for fighter planes. During the war, Opel, as did many German factories, made use of slave labor to keep its production lines running. In August of 1944, Allied bombers destroyed Opel's Brandenburg factory entirely. A year later the facility on the Main was targeted and more than half of it was destroyed. At war's end, Opel, along with the rest of the country, was in ruins.
By May 1945, Opel workers had begun to clear rubble from the factory, and within a brief period the first machines were running. The company soon learned, however, that its facility at Brandenburg would be demolished, not returned to use. In addition, Opel was compelled to sacrifice its entire Kadett production line to the Soviet Union as part of Germany's war reparations. Consequently, the Soviet model Moskwitsch 400 is a renamed 1947 Opel Kadett.
Since Germany needed trucks for reconstruction, Opel resurrected its old Blitz model, turning it out with the six-cylinder engine previously used for the prewar Kapitan luxury car. In December 1947, the company began automobile production once again. Opel's old partner, General Motors, resumed management of the firm the next year, as German currency reform stabilized the economy and enabled citizens to once again consider the purchase of a car. To take advantage of this new situation, Opel marketed the Kapitan, at a price of DM 10,000.
Return to Prosperity in Postwar Era
Germany's new federal republic prospered in the 1950s, and Opel marketed cars which reflected this new affluence in their design. Opel cars were loaded with chrome, their style heavily influenced by American automobiles. The 1952 Olympia Rekord featured a famous "shark mouth" grille, and the 1957 Rekord had "panorama" windows. Opel also adopted the practice of updating its models every year, as American car makers did, and the company began to export its cars to the United States. In 1956, the two-millionth car rolled off Opel's assembly lines.
In 1962, Opel's 100th anniversary, the company opened a second large factory complex, in Bochum, and also expanded its facilities at its flagship site in Russelsheim. In 1966 a testing center in Dudenhofer and a third factory in Kaiserslautern were also opened.
Throughout the 1960s Opel continued to expand its model line, adding the Kadett A to compete with compact cars, and revamping older models. In 1970 the company introduced the Ascona and the Manta, both designed with a more sporty look. The Manta quickly gained a place in German popular culture as the working-man's dream car. By the end of 1972 Opel held the largest portion of the German car market with 20.4 percent.
In 1975 West Germany's automobile market entered a boom period, and Opel expanded its production capacity to keep pace with demand, adding 10,000 workers at its Russelsheim plant in just four years. The resultant crowding and pressure to produce created tensions between the plant's workers and its GM management.
In 1977 Opel added to its model line with the Senator, designed to appeal to Germany's ever-more-affluent middle class. Two years later the company added its first car with an engine over the front wheels, rather than behind the car. By this time, however, the German auto boom was over, as rising fuel costs made larger models unattractive. Opel's overly optimistic sales estimates caused it to suspend production at its main plant for ten days at the end of the year, in order to ease an over-supply of its larger cars.
In 1979 GM managers announced an ambitious $2.5 billion investment plan to revamp Opel facilities, build new factories in Spain and Austria, and introduce new models in the important compact and subcompact ranges. The company planned to produce a subcompact car called the Corsa at a plant in Zaragosa, Spain, and to start the production of a newly redesigned, aerodynamically sleek Kadett at Opel's Bochum works. These steps were part of an attempt to change Opel's image from that of a traditional, conservatively dependable car to a technologically sophisticated car.
Losses Mount in 1980s
As Opel's slump continued into the 1980s, the company's financial problems began to foster dissent among its workers, and the company developed a reputation for the worst labor relations in Germany as it laid off 5,000 workers at its Russelsheim plant. Employees complained that they had no say in decisions being made about the company in GM's headquarters in Detroit, Michigan, and objected in particular to plans for producing cars in Spain. In the fall of 1980 GM replaced Opel's U.S. head, and took steps to streamline the administration of its German subsidiary.
Opel's sales continued to lag in the early 1980s. Far from the days when it was known as GM's "money machine," Opel--and its British affiliate--lost $426.7 million in 1981. By the start of the following year, however, the company's sales had started to pick up, spurred in part by its introduction of new, smaller, fuel-efficient models, such as a revamped Ascona. Opel's market share in Germany rose to 18.8 percent in 1982, led by sales of the Kadett and the Ascona, which trailed only Volkswagen's Golf.
This progress was stymied in part the next year, however, due to the company's continuing labor difficulties. A 50-day metalworkers' strike in mid-1983 cost Opel 13 percent of its annual production. Despite this setback, the company managed to retain 18.5 percent of the German market, turning a profit of $100 million.
By 1984, however, Opel was back in the red, with production down and losses totaling $227 million. In 1986 the company lost $372.1 million, as lowered prices and rising costs for advertising offset increases in sales. Facing a flat market for automobile sales, Opel managers looked to reduce its labor force further, increase automation, and overhaul inefficient systems. To this end, in 1988, the company announced a plan to cut 5,200 jobs. To further economize, the company began to purchase parts from other automakers, entering into an agreement with Isuzu Motors of Japan, in particular.
Turnaround in the 1990s
Louis R. Hughes followed Dr. Horst Herke as chairman of Opel in 1989. Hughes told Fortune's Richard S. Teitelbaum that the reunification of Germany that same year was "the opportunity of the century." Opel moved quickly to take advantage of the changed situation, negotiating the purchase of an automobile plant in the East German town of Eisenach. Hughes set out to transform the Eisenach facility from a run-down plant filled with apathetic workers into a model of productivity, making Opel the former East Germany's market leader in the process. Hughes implemented modern management programs and invested one billion Deutsche Marks in automation. Production increased from about 60,000 Wartburgs under the communists to 160,000 Opel Corsas and Vectras by the mid-1990s. In 1995, The New York Times noted that "Eisenach has been rated as the most efficient plant in Europe, with production of 59.3 cars a worker each year."
Hughes was promoted to executive vice president of General Motors (Europe) AG that year, later advancing to president of that division as well as president of GM's International Operations. The Opel chairmanship went to David Herman, a 15-year veteran of GM's European and South American operations.
After record-setting profits in 1991 and benchmark sales in 1992, Herman found himself faced with a recession-induced loss of US$300 million in 1993, spurring a new phase of restructuring. By the spring of 1995, he had cut Opel's overall work force by 19 percent, or 11,000 workers. New employee relations programs helped slash absenteeism by 18 percent, while wage and work rule concessions from labor unions helped free capital for multi-billion dollar capital improvements. Opel bounced back to a US$198 million profit in 1994.
But the news at Opel wasn't all good. In the middle of 1995, a kickback scandal involving dozens of employees came to light. The scheme involved suppliers offering cash and gifts to Opel employees and executives in exchange for favorable consideration in contract negotiations. Three managers resigned amidst the investigation in 1995, and another may have committed suicide over the fraud. At the same time, Opel had accused its main German rival, Volkswagen AG, of industrial spying in a case centering on Jose Ignacio Lopez de Arriortua. Lopez was accused of stealing secret corporate documents from Opel when he was lured away to Volkswagen in 1993. Without admitting guilt, Volkswagen settled with GM in 1997, when the former agreed to pay the latter US$100 million cash and to purchase US$1 billion in auto parts from General Motors by the year 2004.
In the meantime, Opel continued in its role as the spearhead of GM's international growth, continuing its European expansion and building assembly operations in Asia, South America, and Africa. Fueled by mounting research and development budgets, the company launched exciting concept cars like the modular MAXX "city car" and the Tonga "funmobile." The company added the Cadillac Catera to its European lineup--which then included the Astra and Omega minivans, Vectra mid-sized sedan, and the award-winning Corsa compact--in 1996. While not surpassing records set in 1992, sales rose from DM 25.9 billion in 1995 (US$18 billion) to DM 28.3 billion (US$18.4 billion) in 1996, while net slid from DM 363 million (US$252.8 million) to DM 314 million (US$203.9 million).
Principal Subsidiaries: Saginaw Deutschland GmbH; Adam Opel Unterstuetzungskasse GmbH; Opel Eisenach GmbH; GM Europe GmbH; Opel-Automobilwerk Eisenach-Pkw GmbH; Opel Wohnbau GmbH (99%); Autohaus am Nordring GmbH (68.8%); General Motors Holding España S.A. (Spain; 26.1%); General Motors Türkiye Ltd. (Turkey; 99.5%); General Motors Coordination Center N.V. (Belgium; 78.1%); Saab Automobile AB (Sweden; 32%); Delphi Automotive Systems France S.A. (France; 49.6%); Opel Hungary Automotive (Hungary); General Motors Poland Sp.z o.o. (Poland); Opel Polska Sp.z o.o (Poland); Woodbridge Foam Deutschland GmbH (20%).
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