Adam Opel AG - Losses Mounting in 1980s

Losses Mounting 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 Rüsselsheim 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 and the Corsa, which began rolling off the new assembly in Spain. 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, because of 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. Also in 1988, the Opel Vectra was introduced as a replacement for the popular Ascona.