By on October 12, 2012

Think of it as a merger of the equally sick: PSA’s automotive division (Peugeot Citroen) and Opel could be put into one company, a joint venture between GM and PSA, La Tribune reports with Reuters providing the translation.

Neither company had a comment. According to the “secret plan,” GM would bring fewer cars to the deal, but would inject cash.  The proposal is likely to run into objections from the French government and has yet to be submitted to the Peugeot board, the report added.

La Tribune sees few synergies in a link-up. Both companies are focused on the same market Europe, and compete in similar segments. Both lack presence in growth markets. Combining Europe’s second largest carmaker PSA with Opel would not even create a carmaker larger than Volkswagen.

 

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36 Comments on “Malaise-Merger: Opel And PSA To Be Combined...”


  • avatar
    NMGOM

    I was wondering if that was going to happen. It makes sense in a perverse, gallows-humor kind of way. Combing the sick either doubles your illness or forces a cure….

    ——–

  • avatar

    and $300 million to Girsky’s bankster buddies for their “advice” like Chrysler and Nissan? or the Fiat Fiasco? I don’t trust anything this man is involved with.

  • avatar
    Rod Panhard

    The article reads less like a “merger” story and more like a “Fiat & Mazda sharing a platform” story.

    • 0 avatar
      Pch101

      “The article reads less like a “merger” story and more like a “Fiat & Mazda sharing a platform” story.”

      I would say that it reads like a “GM would like to dump Opel into somebody else’s lap” story.

      GM wants to put Opel into a place where it can fail without forcing GM to rescue it. If the new venture works, fine; if it doesn’t, then Detroit won’t have to write checks to liquidate it. Win-win, either way.

  • avatar
    tatracitroensaab

    This is an awful, terrible idea. Like as in when I saw the headline I thought it was April Fools. Actually this is a great idea for GM to chuck out a bad asset, but this makes PSA a goner. There is no way that they will have the cash to turn things around, or even to have the cash to weather things out. This makes me sad not because I care for Opel or Peugeot, but because this is going to kill Citroen before they ever had the chance to really make a comeback. If Citroen has enough time, I think it could really become a cool luxury brand, which is frankly what Peugeot should have done with it in the first place. Ugh.

  • avatar
    th009

    After an immediate negative reaction … I think this actually could be made to work. But it needs to be integrated with GM globally, otherwise it’ll just be two sick men making each other sicker.

    But as a global automotive group, you would now be looking at 12M+ units per year, clearly bigger than Toyota and VW, with massive purchasing power. You would need to ruthlessly shut down some factories (maybe easier if you are no longer a French company), force new models onto common platforms and sort out the branding (five brands in Europe — Opel, Vauxhall, Chevrolet, Peugeot, Citroen — is too much). Citroen as a premium brand, Chevrolet for the low end and some other combination in the middle could work.

    It would take time to show positive results, but GM has strong positive cashflow that could see this through (PSA doesn’t have that luxury). If they don’t mess it up …

    • 0 avatar
      NMGOM

      th009….

      Actually, your analysis may underlie exactly what GM may be thinking. In a good economy, this might work. But some projections suggest that we are heading back into a recession by Fall, 2013. In that case, the timing of this whole thing may be off, and all 3 companies will suffer, some terminally.

      ———-

    • 0 avatar
      doctor olds

      @th009- Good to see some reasonable sense about what this means from the perspective of scale. maybe it won’t make for the largest maker in europe, but will bring #2 much closer to #1. it would be the largest global entity by a huge margin!

      • 0 avatar
        Pch101

        “it would be the largest global entity by a huge margin!”

        Of course, having scale really helped GM to avoid bankruptcy in the past. (Cough, cough.)

        And in any case, if this thing were to happen, then it sounds as if Opel would be spun out of GM. Presumably, it would be structured so that Opel-PSA could fail without pulling down Detroit with it.

        This sounds more defensive than offensive. If it fails, GM wouldn’t have to worry much about it, and it will be a prime candidate for a European bailout, since it’s the de facto leaders of the EU (France and Germany) that would be left holding the bag. You can bet that the Germans will be far more interested in state interference when it’s their backsides in a sling, instead of the Greeks.

        It’s understandable why PSA would be more reticent — this hands them an albatross without much upside potential and a lot of downside risk. This makes GM’s situation better, but it doesn’t do much for PSA.

      • 0 avatar
        sunridge place

        ‘Of course, having scale really helped GM to avoid bankruptcy in the past. (Cough, cough.)’

        Actually, one of the dozen or so reasons GM went bankrupt was the fact that they didn’t use their size to scale very well.

        Cruze was one of their first true global car efforts and it came way too late to help.

      • 0 avatar
        doctor olds

        @pch101- i resisted pointing out your ignorance of the value of scale and the reasons for the actions in europe in your simplistic presumptions, but now that you have invited it….

      • 0 avatar
        Pch101

        “Cruze was one of their first true global car efforts and it came way too late to help.”

        The Cruze has lackluster sales in Europe and Australia. As far as I can tell, the only markets where it sells well are the US and China. So much for globalization.

        World cars generally don’t work at the mainstream level, particularly for midsizes. Americans have their own tastes, and they tend not to translate well globally.

        “i resisted pointing out your ignorance of the value of scale and the reasons for the actions in europe in your simplistic presumptions”

        We should bottom line this for the sake of brevity:

        -You worked for a company that FAILED

        -You express support for business models that were embraced wholeheartedly by the company that FAILED

        -Your former employer FAILED because it wrongly believed that size was more important than customer satisfaction or margin

        I realize that you are a fan of FAILURE, but FAILURE is bad for business. Go ahead and research the concept of “diseconomies of scale.” The old GM — your employer that FAILED — had diseconomies in abundance.

        The bankruptcy taught you nothing. Let’s hope that the new company has learned more than you have.

      • 0 avatar
        28-Cars-Later

        “We should bottom line this for the sake of brevity:

        -You worked for a company that FAILED”

        Wow… a little harsh, man.

        Really when you break it down, as poorly as GM may have been mismanaged, and I am not arguing it was not, the United States is really the one who failed. Our manufacturing industry got its ass handed to it mostly by globalization and partially by a major political shift in regulation. If we had played protectionist and put 1000% tariffs on foreign made cars in the 70s, the Big Three would not have bled so much market share and their Sloane era marketing would have continued to this day in a captive North American market. The consumer would have paid for it in poor product vs imports of the time, but our industry would still be relatively intact. Consumers voted with their pocketbooks and the political establishment let industry slowly die or be sold off through things like NAFTA and GATT.

        This isn’t as simple as GM failed, the bankruptcies are a symptom of a much bigger problem. More people are unemployed than ever, the food stamp rolls are the highest in our history. Why? We allowed our nation’s industry to be sold off and our jobs exported to the third world by the economic and political elites. Facebook is not a product. ‘Green energy’ is not a product. Apple builds product, but only overseas and most of the product they do build is fire-and-forget consumer junk outdated twenty minutes after its goes on sale. Wal-Mart is a job not a career, as is the Apple store, Best Buy, and all of the other opportunities of the ‘service’ economy. There is a big difference between a job and a career.

        Wake up people we are about three inches away from being totally screwed economically as a nation. No industry = no recovery… no matter what Teleprompter-in-Chief is saying.

        We have freedom of choice in our nation, and just for good measure, given the chance I will choose to buy a new 1998 Olds 88 LSS out of a car museum than any 2012 Camry, Altima, or Accord.

      • 0 avatar
        sunridge place

        ‘The Cruze has lackluster sales in Europe and Australia. As far as I can tell, the only markets where it sells well are the US and China. So much for globalization.’

        2011 CY Cruze Sales
        ~700,000 Global
        ~232,000 US
        ~222,000 China
        ~246,000 Rest of the World

        That’s not a global car?

        ‘World cars generally don’t work at the mainstream level, particularly for midsizes. Americans have their own tastes, and they tend not to translate well globally’

        That’s a fairly accurate statement for mid-size cars (Camry, Accord, Malibu etc) but we’re not talking mid-size.

        Cruze is a compact and is global just like Corolla, Civic, Focus etc and that’s what I was talking about.

        Oh yeah, as far as Europe. From what I see, Cruze sold a little over 37,000 units in CY 2011. Corolla sold under 27,000 units. Does that mean Corolla isn’t a global car?

      • 0 avatar
        Pch101

        “Cruze sold a little over 37,000 units in CY 2011. Corolla sold under 27,000 units. Does that mean Corolla isn’t a global car?”

        Corolla is a nameplate that is attached to a variety of cars. In Japan, Corolla is a subbrand of Toyota that is attached to a variety of vehicles. The Corolla that is sold in North America is not sold in all of Toyota’s other markets, and when it is, it is sometimes branded differently.

        If anything, the Corolla proves my point for me. It isn’t the mainstay compact in all of TMC’s markets, and the Corolla varies from place to place. Corolla is a global nameplate, but it is not a world car.

        For a large scale producer that wants high volume, world cars tend not to succeed. World cars can work when they are low volume, particularly luxury cars. (Or more to the point, those models have to be world cars because their volumes are too low to justify that much differentiation from market to market.)

      • 0 avatar
        Pch101

        “If we had played protectionist and put 1000% tariffs on foreign made cars in the 70s, the Big Three would not have bled so much market share and their Sloane era marketing would have continued to this day in a captive North American market”

        Personally, I’m pretty happy that the American consumer isn’t forced today to choose between a $35,000 Vega and a $35,000 Pinto.

        The emergence of the Japanese in the US car market sparked a revolution in quality that would have never happened otherwise. GM dug its own grave by failing to adapt. Protectionism wouldn’t have made GM a better company, it would have just bolstered the confidence of the mismanagers in Detroit. They would have been even more insufferable and convinced of their abilities, which was already bad enough as is.

      • 0 avatar
        th009

        @Pch101, in addition to the Cruze, here are three examples of world cars that are not luxury cars: Golf. Focus. Versa. Each of those manufacturers has other examples as well, such as the Fiesta and Jetta.

        Toyota and Honda tend to produce more region-specific models rather than standardized cars.

      • 0 avatar
        Pch101

        “here are three examples of world cars that are not luxury cars: Golf. Focus. Versa”

        The Golf is pretty much a has-been in the US market. VW touts the Jetta and designs the Jetta specifically for the US market here because Americans want trunks, not hatches.

        We all know that VW got serious about the US market when it began modify its cars to suit the US market. Americans want different things from what consumers in other markets want, particularly Europe.

        As for the Versa, it’s a subcompact. Suboompacts don’t generate enough sales volume to justify the costs of building anything that isn’t a world car. If Americans bought more subcompacts, then you would see the automakers making US-oriented subcompacts, but that simply isn’t the case today.

        The Focus is an experiment of sorts. We’ll see if “One Ford” pays dividends for Ford in the long run. It should be noted, though, that “One Ford” is a misnomer, given the variations in products from market to market.

      • 0 avatar
        th009

        Different markets have different car preferences; US and China prefer sedans. Still, VW will sell about 45K Golfs in the US this year, almost as much as Volvo’s total sales. Not bad for an outgoing model and a hatchback.

        And even if the Jetta is optimized for the US market, it’s sold worldwide. Same for the Golf wagon (aka Jetta Sportwagen).

      • 0 avatar
        Pch101

        “Different markets have different car preferences”

        Which is why world cars don’t really work. World cars don’t help a company to achieve dominance in the markets in which they participate.

        When VW sells Golfs in the US, it is essentially selling its leftovers to us. That choice may help VAG to amortize the costs of the car over a broader volume, but it also ensures that the company will not be using the Golf to become a leader in the US compact segment, since the Golf has no chance of generating high volume in the US.

        Selling leftovers is not the same as selling a “world car” that has significant demand in all markets. The fact that VAG has to use two sedans to lead its US efforts tells you something about how different the mainstream US car market is from other markets in the world, and why cars that achieve high volumes here are probably not suited for worldwide success.

    • 0 avatar
      tatracitroensaab

      It could work if GM actually took advantage of economies of scale… Opel/Vauxhall would have to die and be effectively replaced by Chevy, which would be the low cost brand. Peugeot would be more premium mainstream (like VW) and Citroen would be a premium brand… This could all work in THEORY. But the fact is that there is no way that GM could pull this off. GM used to be way bigger (relative to everyone else) and that fell apart. GM got fixed up a little and for a while I was hoping that they could truly turn around, but now it seems clear that, while they no longer have truly awful management, it is not the best in the industry either. Plus what would they know what to do with PSA, besides to maximize purchasing power? I don’t think that even VW could pull something like this off.

  • avatar
    rpol35

    Sounds like the 1968 creation of Penn Central; merge a sick railroad with an even sicker competitor, that operates in the same geography, and what do you have? The biggest bankruptcy in America history only two short years later.

  • avatar
    Glen.H

    I dread to think of the clash of management styles in this hook-up…I suspect that PSA might be able to survive as a stand alone, but I really think a merger with Opel will kill both. Older readers might remember the nightmarish marriage of Austin and Morris in Britain and look how that turned out!

  • avatar
    schmitt trigger

    Pch101:
    Thanks for pointing out the term “diseconomies of scale”.
    I Googled the term, and from what i read, it could be describing my old company, Lucent.
    Small wonder its share value evaporated.

    • 0 avatar
      Pch101

      Companies can get to be too big for their own good. GM was definitely one of them.

      GM became complacent and arrogant. GM’s failure provides a case study of what happens when large companies assume that size = success, and then use that size as a rationalization for not adapting to change.

      Toyota revolutionized the US car market, and GM was asleep at the wheel. GM should have been able to stomp Toyota like a bug, but its management was too haughty to believe that General Motors could possibly be vulnerable to a bunch of foreigners.

  • avatar
    ranwhenparked

    I can’t believe the Peugeot family would go for this, although they do have much less control over the company than, say, the Fords do over theirs, so they might not be able to stop it. At any rate, they’re probably less emotionally involved in the car business, since Peugeot as a company predates the automobile division by quite a few years, so it’s not their original industry.

    Also, this does seem to have shades of what’s been going on in the American beer industry. Molson + Coors = Molson Coors; SAB + Miller = SABMiller; SABMiller + Molson Coors = MillerCoors.

    Now, we’ll have PSA + Opel, and if it works well, Fiat and Chrysler probably won’t be far behind.

  • avatar
    johnny ringo

    This is frankly a terrible idea, merging two sick companies almost never works. In 1954 amid great fanfare Studebaker and Packard merged.
    The merger was a complete failure, Packard ended up trying to sell a rebadged Studebaker as a Packard; Packard ceased to exist after 1958; Studebaker struggled for a few more years before pulling the plug on automobile production in December 1963. I see a similar outcome for Opel and PSA if the companies merge.

  • avatar
    doctor olds

    @pch101- You apparently can only understand simple ideas.
    28-cars-later displays an understanding of some of the complexities involved. You assume to know GM because of a brief stint as a financial intern in a field office years ago but betray astoundingly shallow understanding of the company or the car business. Bean counters are universally decried as the cause of many corporate declines.

    GM along with Ford and Chrysler, was weakened by external factors, particularly adversarial government policies such that the financial crisis of ’08 pushed 2/3 of the industry into bankruptcy. You can feel as smug as Joe Biden in your simplistic attack on me and any one of millions of GM people, who worked for a company that failed, but it really doesn’t make you look very bright.

    • 0 avatar
      Pch101

      Again:

      -You worked for a company that FAILED

      -You express support for business models that were embraced wholeheartedly by the company that FAILED

      -Your former employer FAILED because it wrongly believed that size was more important than customer satisfaction or margin

      When I need advice on how to FAIL spectacularly, or if I need weak alibis and excuses for FAILURE, then I’ll be sure to contact you. Otherwise, your “insights” just aren’t that insightful.

  • avatar
    doctor olds

    No excuses, just reasons.


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