GM could sell European divisions to French automaker PSA
02-14-17, 07:05 PM
#1
GM could sell European divisions to French automaker PSA
General Motors is considering the sale of its European brands Opel and Vauxhall to French carmaker PSA, the parent company of Peugeot and Citroen. GM and PSA confirmed the talks Tuesday morning, but said there was "no assurance" an agreement will be reached.
The American and French automakers have worked together in an alliance since 2012 on three projects and said the two sides regularly examine expanding the arrangement.
General Motors has owned Opel, the linchpin of its European operations, since 1929. Opel provides a considerable amount of global engineering expertise for GM – the Buick Regal is essentially an Opel Insignia – and the brand delivers major sales volume in European markets.
Selling Opel and Vauxhall, which GM has owned since 1925, would mean GM would not challenge Volkswagen and Toyota for position as world's largest automaker in the near term, though GM executives have been adamant about no longer chasing volume.
The move could position GM to focus more on mobility efforts and autonomous technology. Further benefits are unclear for GM, and disentangling Opel and Vauxhall, which collectively employ thousands of people and produce millions of vehicles, could prove to be a complicated process. There could also be intellectual property concerns. GM nearly sold Opel to auto supplier Magna in 2009, but that deal was later scuttled.
PSA, a conglomerate that oversees Peugeot, Citroen, premium brand DS, and other entities, was formed in 1976, though Peugeot traces its carmaking roots to the 1880s. Acquiring the GM European divisions would provide it considerably more scale to compete with larger global automakers.
The American and French automakers have worked together in an alliance since 2012 on three projects and said the two sides regularly examine expanding the arrangement.
General Motors has owned Opel, the linchpin of its European operations, since 1929. Opel provides a considerable amount of global engineering expertise for GM – the Buick Regal is essentially an Opel Insignia – and the brand delivers major sales volume in European markets.
Selling Opel and Vauxhall, which GM has owned since 1925, would mean GM would not challenge Volkswagen and Toyota for position as world's largest automaker in the near term, though GM executives have been adamant about no longer chasing volume.
The move could position GM to focus more on mobility efforts and autonomous technology. Further benefits are unclear for GM, and disentangling Opel and Vauxhall, which collectively employ thousands of people and produce millions of vehicles, could prove to be a complicated process. There could also be intellectual property concerns. GM nearly sold Opel to auto supplier Magna in 2009, but that deal was later scuttled.
PSA, a conglomerate that oversees Peugeot, Citroen, premium brand DS, and other entities, was formed in 1976, though Peugeot traces its carmaking roots to the 1880s. Acquiring the GM European divisions would provide it considerably more scale to compete with larger global automakers.
02-14-17, 07:11 PM
#2
Lexus Fanatic
This would really hurt Buick. Its most solidly-built and reliable products are essentially Opel-clones, with only minor variations.
Never underestimate the power of GM to make bad decisions (especially after they've finally gotten something right). You'll never lose money betting on it.
Never underestimate the power of GM to make bad decisions (especially after they've finally gotten something right). You'll never lose money betting on it.
Last edited by mmarshall; 02-14-17 at 07:33 PM.
02-14-17, 10:52 PM
#3
Lexus Fanatic
I can see why GM is looking to dump Opel.
1. GM has not made any money in the European market since 2009.
2. Meeting North American EPA figures is more difficult and costlier to achieve with a European design. Makes no sense to export Opel products or their designs to be built in the USA if it is cheaper and easier to do with North American, or even worse Chinese builds.
At the end of the day, it's unfortunate for Buick to loose the Opel designs, but GM will be in much better competitive position without Opel.
1. GM has not made any money in the European market since 2009.
2. Meeting North American EPA figures is more difficult and costlier to achieve with a European design. Makes no sense to export Opel products or their designs to be built in the USA if it is cheaper and easier to do with North American, or even worse Chinese builds.
At the end of the day, it's unfortunate for Buick to loose the Opel designs, but GM will be in much better competitive position without Opel.
02-14-17, 11:17 PM
#4
Lexus Fanatic
I can see why GM is looking to dump Opel.
1. GM has not made any money in the European market since 2009.
2. Meeting North American EPA figures is more difficult and costlier to achieve with a European design. Makes no sense to export Opel products or their designs to be built in the USA if it is cheaper and easier to do with North American, or even worse Chinese builds.
At the end of the day, it's unfortunate for Buick to loose the Opel designs, but GM will be in much better competitive position without Opel.
1. GM has not made any money in the European market since 2009.
2. Meeting North American EPA figures is more difficult and costlier to achieve with a European design. Makes no sense to export Opel products or their designs to be built in the USA if it is cheaper and easier to do with North American, or even worse Chinese builds.
At the end of the day, it's unfortunate for Buick to loose the Opel designs, but GM will be in much better competitive position without Opel.
02-16-17, 07:49 PM
#5
Lexus Champion
I wonder... Will 2 "half-deads" make an "undead"?
GM Europe is a money-losing venture that GM tried to sell back in the bankruptcy days of 2008-2009, almost selling to Canadian auto-parts maker Magna (backed by a Russian bank). PSA Peugeot Citroën had financial troubles a few years back but was saved by the French (the French government) and the Chinese (Dongfeng Motors), each buying a 13% stake in the company.
The sale of GM Europe may save GM financially but it would mean that GM loses its German (Opel) engineering expertise, where the Delta (Mike's Buick Verano) and the Epsilon (Chevy Malibu) platforms come from (but it seems that GM is relying on its Daewoo unit for engineering expertise these days). Groupe PSA may merely be picking up a money-losing venture. It has been said that Europe has too many auto factories. Unless Groupe PSA is willing to close factories (good luck trying to close French or German plants), buying GM Europe may merely be shuffling the deck chairs on the Titanic.
GM Europe is a money-losing venture that GM tried to sell back in the bankruptcy days of 2008-2009, almost selling to Canadian auto-parts maker Magna (backed by a Russian bank). PSA Peugeot Citroën had financial troubles a few years back but was saved by the French (the French government) and the Chinese (Dongfeng Motors), each buying a 13% stake in the company.
The sale of GM Europe may save GM financially but it would mean that GM loses its German (Opel) engineering expertise, where the Delta (Mike's Buick Verano) and the Epsilon (Chevy Malibu) platforms come from (but it seems that GM is relying on its Daewoo unit for engineering expertise these days). Groupe PSA may merely be picking up a money-losing venture. It has been said that Europe has too many auto factories. Unless Groupe PSA is willing to close factories (good luck trying to close French or German plants), buying GM Europe may merely be shuffling the deck chairs on the Titanic.
02-16-17, 08:26 PM
#6
Lexus Fanatic
The sale of GM Europe may save GM financially but it would mean that GM loses its German (Opel) engineering expertise, where the Delta (Mike's Buick Verano) and the Epsilon (Chevy Malibu) platforms come from (but it seems that GM is relying on its Daewoo unit for engineering expertise these days). Groupe PSA may merely be picking up a money-losing venture.
02-16-17, 09:35 PM
#7
One reason GM might be losing money on its European Opel Division is simply the quality of materials put into Opel-designed vehicles vs. the moderate prices they sell for....one reason among several why I chose a Verano. This is especially the case in the Buick lineup, where the Opel-derived Verano, Cascada, Regal, and Encore all are noticeably more solidly-built and have better reliability (per Consumer Reports) than the larger, more American-derived LaCrosse and Enclave.
Where does Opel have its factories and suppliers located??? I know a lot of the cheaper European cars are made in places like Slovakia, Poland, Romania and other former Eastern Bloc countries where labor is cheaper.
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02-16-17, 11:14 PM
#8
Lexus Fanatic
I think you're on to something, there just isn't any profit margin on lower priced European vehicles. You can't afford to cheap out on how you build your cars in the European market either, its extremely cut throat. Build an inferior product, people will notice and buy something else, as there are plenty of choices..
02-17-17, 07:02 AM
#9
Lexus Fanatic
Incorrect. Unlike the 60s and 70s, when their vehicles were cheaply built, Opels, today, are well-constructed with durable materials. In fact, that is one reason why they often weigh more than their competition....As Aron noted, they don't cheap out.
02-17-17, 10:55 AM
#10
Lexus Champion
I think you're on to something, there just isn't any profit margin on lower priced European vehicles. You can't afford to cheap out on how you build your cars in the European market either, its extremely cut throat. Build an inferior product, people will notice and buy something else, as there are plenty of choices.
Where does Opel have its factories and suppliers located??? I know a lot of the cheaper European cars are made in places like Slovakia, Poland, Romania and other former Eastern Bloc countries where labor is cheaper.
Where does Opel have its factories and suppliers located??? I know a lot of the cheaper European cars are made in places like Slovakia, Poland, Romania and other former Eastern Bloc countries where labor is cheaper.
02-17-17, 06:27 PM
#11
Lexus Fanatic
Europe, and Canada / USA have the same problem: there is no profit to be made building small cars. That is why we here have moved production of small cars to Mexico, and why European automakers have moved some production to Eastern Europe and some production to the USA and Mexico (VW Passat and Atlas, Mercedes-Benz SUVs, BMW SUVs).
02-17-17, 08:02 PM
#12
Lexus Champion
With robots doing more and more of the work in the plants, the traditional argument that companies can't make a profit building small cars holds much less water than it used to. It was true, at one time, when humans did most of the work, that to employ (roughly) the same number of employees in the plant to build a small, inexpensive vehicle as you would have done building a larger, more expensive one usually meant smaller profits and increased overhead. But those days (and much of that argument) went out with the advent of robot-painters/welders/assemblers and lower wages in the auto industry, even among UAW jobs. Today, not only do the machines do much of the work (requiring only a few humans to monitor and service/repair machines), but the remaining humans in the plant don't make the same kind of money they once did....at a time when prices for small cars have risen significantly. So, I just don't see where the often-used "small cars can't make a profit" argument still is relevant.
It costs approximately the same to design, engineer and build a small car as it does a larger car. Perhaps it is even more expensive to engineer and build the small car because parts must be designed smaller to fit in the more compact spaces. Yet, we are not willing to spend as much to buy a small car as we spend on a larger car. If we are willing to spend $25,000 (and give Toyota a nice profit from it) to buy a Camry, we should be willing to spend about as much on a Corolla, but we are only willing to spend $20,000 on the Corolla. How is Toyota going to account for $5000 (20% of the price of the Camry), unless it takes a lot out of the Corolla and/or builds the small Corolla some place where it is cheaper to do so?
This is also the reason that VW decided to build its mid-size Passat in the USA. It costs less to build a car here than it does in Germany.
02-18-17, 07:39 AM
#13
Lexus Fanatic
It costs approximately the same to design, engineer and build a small car as it does a larger car. Perhaps it is even more expensive to engineer and build the small car because parts must be designed smaller to fit in the more compact spaces.
This is also the reason that VW decided to build its mid-size Passat in the USA. It costs less to build a car here than it does in Germany.
02-18-17, 08:35 AM
#14
Lexus Fanatic
Yet, we are not willing to spend as much to buy a small car as we spend on a larger car. If we are willing to spend $25,000 (and give Toyota a nice profit from it) to buy a Camry, we should be willing to spend about as much on a Corolla, but we are only willing to spend $20,000 on the Corolla.
.
.
The vast majority of people buy what they can afford.
02-20-17, 08:25 AM
#15
However, if GM is allocating all its engineering costs for models it sells in the US and other markets entirely to its German Opel division then it will always show a loss in comparison to, say Buick, who isn't having to carry those costs.