Why does PSA want to buy OPEL and VAUXHALL?

 
psa

Photo by Abode of Chaos

Why does PSA want to buy OPEL and VAUXHALL?

A truly intriguing question for the experts, because none of these, except of course ones PSA, are able to answer. And this because it lacks any economic or industrial or commercial evidence of where the winning secret of the takeover.

Opel has not exactly a story of success for the last years, and this it was emphasized by Harald Hendrikse of the Morgan Stanley Agency:

  • Opel lost money for many years, in spite of several attempts to business restructuring (from 2000 GM Europe lost like 15 billion euro);
  • its market share in Europe has fallen from 10 to 7% over the last seven years;
  • in consumer preferences, according to J.D. Power, Opel has a rate below Peugeot and Citroen.

So, do why buy Opel?

There could be several possible motivations:

  1. reduction of costs and investments thanks to the synergies of components and platforms, especially for volumes of LCV much lower than passenger car;
  2. commercial reasons, the market is growing significantly and therefore to try to climb the sales ranking;
  3. the chinese partner of PSA (Dongfeng Motors) begins to ‘expand’ in Europe;
  4. There are important patents for the future.

But these reasons are opposing with known situations, such as overproduction capacity already exists in Europe, and will likely increase as a result of the various city traffic limits and the rise of new mobility shared facilities.

Unlikely in the business world one plus one is equal to two, or even more than two.
Often it makes fewer than two, particularly when there are products overlapping and sold by the same dealers.

Opel is strong with diesel engines, but PSA is the same level, and with forecasts on the future of diesel, especially small ones, will have two problems instead of one.

Vauxhall

Photo by foshie

How will Tavarez, PSA’s CEO, to keep the promise to maintain employment levels in German plants, and of course French, when there will be deep product synergies, which will follow production synergies?

A possible explanation is that if the ‘price is right‘ all you can do, and the famous saving, not certainly in the short term, would depend on the purchase price Opel; we’ll see.

A final consideration, derived from my personal experience concerning: the alliances and acquisitions must have a common base of sharing among the staff of the OEM involved.

Because it involves accepting new procedures, processes, structures and organization, personnel reductions, transfer of personnel, calibrating everything between the two components of the OEMs.

Need flexibility and acceptance of different cultures.

Not just a walk, and waiting to see ‘why‘, wishes for the challenge.

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2 Comments

  1. Srinivasan, Gobichetti says:

    Hi Paolo,
    Thanks for your ideas on PSA’s purchase of Opel. I see the following.

    1) Peugeot can make their models in US at the GM’s factories (may be 3rd shift) to make new Openl an PSA models for the US and Canadian market place. This includes Hybrid, electric and others like LCVs.
    and also for other countries to sell with common sourcing and platforms.
    2) Gives a free hand for GM to purchase Chrysler from FCA or buy whole of FCA and spun off Fiat of Europe to some other car manufacturer like Renault, VW or MB or BMW or PSA again. This wil enable GM to become stronger in USA and ion Canada.

     
  2. paolo says:

    hi Srinivasan, thanks for your comment.
    point 1) the takeover of Opel doesn’t consider the possibility x PSA to use the US plants of GM
    2) now for GM, without the loss due to Opel/Vaux, everything could happen!

     

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