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AutoBlog: REPORT: Opel to cut prices 40% in order to save jobs?

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Filed under: Euro, Plants/Manufacturing, Opel, Vauxhall, UAW/Unions

opel_discounts.jpg

Sometimes deals get made, and then the dealmakers have to employ some pretty creative tactics to get the terms to work. Magna's deal for Opel included taking €1.5 in short term loans from the German government, the string attached being that Magna had to guarantee German jobs.

Saving jobs means selling more cars to maintain production levels, and outside observers are suggesting that Opel would need to cut prices by 40% to move enough metal to keep people on the lines. Of course, a 40% drop in prices makes profit almost impossible, and some are saying Magna doesn't care about profits right now. One analyst said Magna and GM might want to increase costs, since Magna would sell more parts and GM would get more royalties. That, however, seem like the wilder side of speculation.

Magna has said the 40% discount hypothesis is absurd. Magna's mandate was to save German jobs -- that doesn't mean other Opel or Vauxhall factories in other countries can't be shuttered. Such a discount would also bring competing automakers into the debate; they would need to fight battles both on the dealer lot and with their government lobbyists, who would question Opel's right to sell cheap cars with government assistance.

[source: Bloomberg]

REPORT: Opel to cut prices 40% in order to save jobs? originally appeared on Autoblog on Fri, 19 Jun 2009 09:34:00 EST. Please see our terms for use of feeds.

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