PSA Group ex­plor­ing Opel unit takeover

Unions push back as Peu­geot maker eyes GM’s Euro­pean busi­ness

The Hamilton Spectator - - BUSINESS - DAVID MCHUGH

France’s PSA Group, maker of Peu­geot and Citroën cars, says it’s ex­plor­ing a pos­si­ble takeover of Opel, Gen­eral Motors’ money-los­ing Euro­pean busi­ness.

PSA Group said in a state­ment Tues­day it was con­sid­er­ing “nu­mer­ous strate­gic ini­tia­tives” that would ex­pand the ex­ist­ing co-op­er­a­tion, and a takeover of Opel was one of them. PSA Group and GM are al­ready in­volved in sev­eral joint projects in Europe.

GM said “there can be no as­sur­ance that an agree­ment will be reached.”

The deal im­me­di­ately met re­sis­tance from labour lead­ers.

Ger­many’s IG Me­tall labour union and Opel’s works coun­cil said they were caught by sur­prise with news of the po­ten­tial sale of Opel. Any such talks with­out their con­sent would be “an un­prece­dented vi­o­la­tion of all Ger­man and Euro­pean co-de­ter­mi­na­tion rights,” the two said in a joint state­ment.

Prime Min­is­ter Volker Bouffier of Ger­many’s Hesse state said that he’ll seek talks with com­pany man­age­ment, with a view to se­cur­ing jobs and keep­ing Opel’s devel­op­ment cen­tre — “the core, the most im­por­tant part of Opel” — in Rues­selsheim, out­side Frankfurt.

Detroit-based GM is weary of hav­ing to re­port losses year af­ter year in Europe, where it last made a full-year profit in 1999 on a pre­tax ba­sis.

An out­right sale would elim­i­nate the losses; but GM re­lies on Opel for de­sign work and uses Opel mod­els as the ba­sis for GM mod­els in other mar­kets.

Re­becca Lind­land, ex­ec­u­tive an­a­lyst for Kel­ley Blue Book, said that “Opel has been hem­or­rhag­ing money for the last 16 years, so hard de­ci­sions are on the ta­ble in (CEO) Mary Barra’s ver­sion of a prof­itable GM.”

Lind­land said that untangling Opel from GM would not be easy but that “even if GM sells Opel to PSA, I can see a world where both com­pa­nies con­tinue with ex­ist­ing joint projects long into the fu­ture, as th­ese types of en­gi­neer­ing col­lab­o­ra­tions pro­vide vi­tal economies of scale on a lo­cal and global ba­sis.”

Com­bin­ing PSA Group with Opel and its Bri­tish brand Vaux­hall would cre­ate the sec­ond-largest car­maker by mar­ket share in Europe, with 16.6 per cent of sales ac­cord­ing to 2016 fig­ures. The com­bi­na­tion would be sec­ond only to Volk­swa­gen, with 23.9 per cent, and would vault ahead of the Re­nault-Nis­san al­liance, which had 13.9 per cent.

Be­ing big­ger can, in the­ory, bring per-ve­hi­cle cost ad­van­tages by spread­ing fixed costs such as in­vest­ment in plants and equip­ment over a larger num­ber of ve­hi­cles.

Efraim Levy, an an­a­lyst at CFRA Re­search, said that “deeper in­te­gra­tion or part­ner­ship is more likely in our view than an out­right sale” of Opel.

GM and PSA Group formed an al­liance in 2012 in an at­tempt to make pro­duc­tion more ef­fi­cient. In late 2013, GM an­nounced it was sell­ing its stake, although the two com­pa­nies con­tin­ued work­ing on joint ve­hi­cle projects.

For in­stance, GM will make Citroën’s forth­com­ing sub­com­pact cross­over ve­hi­cle be­gin­ning later this year at a plant in Zaragoza, Spain.

Since leav­ing bank­ruptcy pro­tec­tion in 2009, GM has lost $5.88 bil­lion be­fore taxes on Euro­pean op­er­a­tions, ac­cord­ing to gov­ern­ment reg­u­la­tory fil­ings.

It had hoped to reach breakeven in Europe by now, but last year posted a loss of $257 mil­lion de­spite sell­ing 1.1 mil­lion ve­hi­cles, and even as GM as a whole turned in a ro­bust profit of $9.4 bil­lion.

The com­pany noted that the Euro­pean op­er­a­tion would have bro­ken even if it had not suf­fered a $300-mil­lion hit from the Bri­tish vote to leave the Euro­pean Union.

The re­sult­ing plunge in the Bri­tish pound shrinks the dol­lar value of earn­ings from its Vaux­hall mod­els in that mar­ket.

MARTIN MEISSNER, THE AS­SO­CI­ATED PRESS

PSA Group, maker of Peu­geot and Citroën cars, says it’s ex­plor­ing a takeover of Opel, Gen­eral Motors’ money-los­ing Euro­pean busi­ness.

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