By on February 16, 2017

GM: Barra at 2016 GM Annual Stockholders Meeting

It comes across as a movie scene where the departing mother soothes the nerves of two children frightened by their father’s impending remarriage.

In this case, the children are the trembling employees of German General Motors division Opel, and the departing parent is GM CEO Mary Barra. Well, “departing” isn’t accurate, at least not yet. The American automaker is in talks with France’s PSA Group to potentially sell off Opel, as well as its Vauxhall sister division.

Yesterday, Barra spoke to employees at Opel headquarters, hoping to allay fears and quell protests from Opel’s works council and union, as well as the German government. Her words, or what we know of them, relayed the message, “Kids, it’s gonna be okay.”

“While there can be no assurance of any agreement, any possible transaction would enable PSA Groupe and Opel Vauxhall to leverage their complementary strengths, enhancing their competitive positions for the future in a rapidly changing European market,” Barra said in a message partly recovered by Reuters.

The CEO urged workers not to be distracted by the talks and to continue working as if nothing huge was going on in the background. Anyone looking for specifics on the potential takeover walked away disappointed.

GM and PSA “are simply not at that point in our discussions,” Barra said.

Assuming any takeover goes forward in a calm and sensible manner, Barra’s prediction could become reality. The two automakers, when combined, would carve a much bigger slice of the European auto market from Day 1, second only to Volkswagen Group. Minus the future challenges of sharing technology and platforms, the move would bring clout.

According to the European Automobile Manufacturers’ Association, Opel and PSA’s market share shrank last year. January sales from both companies made up 16.4 percent of the Euro car market, down from 17.1 percent the year before. In contrast, Fiat Chrysler Automobiles say its share rise, while VW stayed stable at 24.2 percent. Sales are also up at Renault and Daimler AG, while BMW AG and Toyota also posted market gains.

A source familiar with the talks told Bloomberg that GM wants many billions of dollars for Opel due to the brand’s improving outlook. By buying Opel, PSA could cut costs and invest money in the development of new technology. The French automaker’s finances are robust enough to handle the takeover, analysts claim.

[Image: General Motors]

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60 Comments on “PSA-Opel Marriage Best for Both Companies, Says GM’s Barra...”


  • avatar
    Corey Lewis

    Billions now, but GM will come down on price when the negotiations get down to it, IMO. They’re well aware the brand has been nothing but a dent in the balance sheet for years.

    It’s nearly a Saab by any other name.

    • 0 avatar
      28-Cars-Later

      Mary will throw in a few unsold ELRs to sweeten the pot.

      • 0 avatar
        Corey Lewis

        “And if you should sign on the dotted line, sirs, I will make sure you get a few Volt Prem… I mean ELR… er Opel Amperas.”

        • 0 avatar
          PrincipalDan

          I wonder if the deal will include transferring Opel platform engineers (who have been doing the heavy lifting on many platforms) to some “safe haven”?

          “And Claus will be relocating to our Korean design center so he can keep working on the next small car platform.”

          • 0 avatar
            28-Cars-Later

            I wondered the same thing Dan. I suppose in theory PSA has its own R&D to not need more, and roughly half of GMs in at Opel.

            MARY: Ok so you get these old factories with legacy environmental costs, a difficult workforce, and brands with low equity while we get to keep the best and brightest R&D for evacuation to North America.
            PSA: [thinking] Well, do get to finally conquer some Germans!
            MARY: Just try not to surrender to them in the first week and you’ll be fine.

          • 0 avatar
            Carlson Fan

            “I wonder if the deal will include transferring Opel platform engineers (who have been doing the heavy lifting on many platforms) to some “safe haven”?”

            I suspect that’s a possibility. Also who knows what kind of cross training has been going on. No one posting on this board. I’m sure engineering resources and/or loss of that “tribal knowledge” has been discussed.

            Seems like a good move to me on GM’s part but then I don’t know all the details and possible ramifications.

          • 0 avatar
            Lorenzo

            Wasn’t it reported awhile back that GM had separated Opel R&D into a separate group, or was it just a separate location? this came up back when GM was thinking of just shutting down Opel.

          • 0 avatar
            John-95_Taurus_3.0_AX4N

            Did it again 28, spectacular!

          • 0 avatar
            RobertRyan

            @PrincipalDan
            In a word no. GM US will have to develop it’s own,
            . A novel experience.

          • 0 avatar
            28-Cars-Later

            Thx John.

  • avatar
    Whatnext

    It is a truism that no company ever shrank their way to greatness. Ms.Barra is shaping up to be the Roger Smith of her time.

    • 0 avatar
      TMA1

      But sometimes they can shrink their way to survival, and growth in better times, like Ford did.

    • 0 avatar
      jmo

      I don’t know about that. GE was famous for exiting businesses in which it couldn’t be a top 3 player.

    • 0 avatar
      Lou_BC

      It is well documented that there is overcapacity in the auto industry. Divesting weak divisions before they become huge liabilities is smart business.

      • 0 avatar
        28-Cars-Later

        Links on overcapacity? I’ve argued for some time there are too many brands and mfgs, but not necessarily on production capacity.

        • 0 avatar
          dash riprock

          opel has an excess in Europe as does psa

          • 0 avatar
            Big Al from Oz

            Lou,
            Eastern Europe plays a part in this over capacity.

            I made a comment regarding the EUs over capacity.

            With Brexit looming I would be more uncomfortable at Vauxhall vs Opel.

            I think Opel does more design work as well.

            Remember GM also kept its Aussie design centre operating. GMH has a number of ex BMW engineers and designers. GMH also has experience in rear wheel and small FWD vehicles.

        • 0 avatar
          Lou_BC

          28-Cars-Later – 20% overcapacity is a number that sticks in my brain.
          Emerging markets may absorb that “over capacity”. We are seeing more nationalization which is obviously an impediment to free trade. That will worsen any local “overcapacity” if that sector was reliant upon exports.
          Sergio Marchionne used overcapacity in industry one reason for wanting to merge with another company.

          “Europe is in a particularly difficult position because it is maintaining significant overcapacity,
          according to the European Automobile Manufacturers Association (ACEA).2

          Moreover, a number of lower-cost brands have recently entered the market, heightening
          competition further. European OEMs have announced capacity reductions of
          750,000 vehicles by 2015. But with regard to how the market is likely to develop, that
          may not be enough. If OEMs in Europe do not revise their production footprint beyond
          the announced capacity adjustments, it could be five years before the industry gets
          back to its precrisis utilization rate and related profitability levels. Similar challenges
          apply to OEMs in Japan and South Korea, where capacity adjustments have already
          been initiated.”
          http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Automotive%20and%20Assembly/PDFs/McK_The_road_to_2020_and_beyond.ashx

        • 0 avatar
          dash riprock

          The only Opel factory that is operating at an optimal level is the plant in Poland. Believe they have 5 others all operating at 75% or less.

    • 0 avatar
      dash riprock

      GM is growing profits. But that is not a concern for many it appears

      • 0 avatar
        Carlson Fan

        Exactly. If I’m a stockholder do I want volume or profits? If this sale means better long term stability & profits which can fuel future growth, I’m for that as well.

        • 0 avatar
          DenverMike

          GM sales/profits are strong. Except those are sales GM dealers. Eventually said cars will hit the streets with strong incentives/rebates. But those don’t count, not right now.

          • 0 avatar
            dash riprock

            Perhaps read the annual reports or sec filings to have an understanding of the financial position of GM. You may want to go back several years to see if there is a trend developing. Or, just do as you always do.

          • 0 avatar
            DenverMike

            Why go back? This year’s incentive/rebate losses on cars “sold” 2016 calendar (to dealers) won’t retroactively appear on the “2016” report.

          • 0 avatar
            dash riprock

            You mention one cost variable. There are countless other revenue or cost variables that factor into bottom line margins and profitability. If you review multiple quarterly/annual reports you will be able to see what the trends are and maybe identify if your concern is material or not.

            Or, you can hang your hat on issue one and go with that.

          • 0 avatar
            DenverMike

            Incentives/rebates are a huge variable though. Likely well into the billions for GM, this time around. But you sound like a stockholder. Good luck.

          • 0 avatar
            dash riprock

            Came close to owning stock around your election. But the price bumped up quickly and the CDN $ went down and I decided not to.

            As I said there are many variables that lead to the health of an organization. There are metrics that you can follow quarter to quarter to pick up trends. It does take some time and effort though. Your method of coming to a judgement seems more “time efficient”.

        • 0 avatar
          Big Al from Oz

          Carlson Fan,
          GM could become too reliant on its large US vehicles (pickups and SUVs) like FCA.

          The US market isn’t as influential as it once was.

          US consideration in vehicle manufacturing is wanning. The most successful manufacturers are global, not regionally global like GM.

    • 0 avatar
      APaGttH

      So true, that’s why Ford is circling the drain after getting rid of Volvo, Mercury, Jaguar, Aston Martin…

      That’s why Toyota is doomed for getting rid of Scion.

      Wait a minute.

    • 0 avatar
      RobertRyan

      @Whatnext
      Wonder who is going to buy the Silverado and GMC, Volkswagen LOL

  • avatar
    cognoscenti

    Barra is already far superior to Roger Smith in every single measurable category. That’s really an unfair accusation.

  • avatar
    Lou_BC

    If they want hugs, Sergio is available.

  • avatar
    TMA1

    Chevy – Korea
    Buick – China

  • avatar
    SCE to AUX

    Having PSA’s market share grow by acquiring a losing auto group makes no sense for the bottom line.

    “We lose money on every one, but we make it up in volume!”

    This seems little different than expecting ready buyers for Saab, Fisker, and other losers. What’s really in it for PSA?

    • 0 avatar
      carguy

      Exactly. GM is losing a loss making division but what does PSA gain? Maybe they think that pooling R&D efforts will make them profitable? Or maybe its leverage for yet more government assistance?

    • 0 avatar
      John-95_Taurus_3.0_AX4N

      Not right away it doesn’t.

      Tata bought JLR which was losing money. Now they’re building them like no tomorrow. Granted, their early success was in part due to products they were developing under Ford’s hand, but its safe to say that they’ve been on a roll since. And not a roll down hill as has been the case several times in the past.

      Edit: add Volvo as another example. Sometimes a smaller, leaner company, in this case PSA, can do what bigger conglomerates can’t.

    • 0 avatar
      Pch101

      It’s a defensive move against VAG, which controls about 1/4 of the European market.

      PSA is probably going to hit the wall if it doesn’t do something like this, as the smaller players are destined to get steamrolled.

      A merger, JV or something of the sort is a good idea for PSA, although this alone doesn’t magically solve all of its problems. It would have to grow these brands, not just own them.

      • 0 avatar
        Big Al from Oz

        Pch,
        I think it’s a more opportunistic move by PSA. VAG would be a consideration, but not at the top of PSA’s list.

        All businesses want growth.

        If PSA can acquire Opel and Vauxhall it opens the doors more for French industry in the global market.

        Renault, by paying 66 billion for Nissan has improved Renault’s global position. PSA will achieve the same.

  • avatar
    thegamper

    I am not sure on all the market statistics, but I think this makes sense for GM, not so sure about PSA. In any event, I would think that PSA must get some IP out of the deal. They can plunder current platforms, cut their R&D by half over the next product cycle anyway. Perhaps it gives them inroads they need for the German and UK markets that they just aren’t getting with French brands.

    I think it will be more interesting to see how GM picks up the pieces in Europe. Do they try to sell Chevys again, because you know they wont give up on that market. What will their new European division look like, what cars will they sell? I don’t think the entire continent will become a vast wasteland where GM dare not compete. They must have some plan for a footprint there.

    • 0 avatar
      Lorenzo

      Sergio has a plan for Mary Barra and GM: a merger with FCA! The big selling point will be that Sergio will go away and take Mary off his speed dial.

    • 0 avatar
      RobertRyan

      @thegamper
      They are exiting the European market.. No they do not have anything to sell. It is the equivalent of shutting the Silverado and GMC lines in the US.

      • 0 avatar
        Lorenzo

        I wouldn’t say GM is exiting the European market, they’re just ridding themselves of high cost troublesome, German-based assembly. Canada has a trade deal with the EU, and GM has Canadian plant capacity. GM could build small, Euro-sized cars to EU specs in Canada for export to Europe for less than the cost of dealing with German Unions. Besides, Trump would be easier on GM for building Buicks built in Canada or the US than importing them from Germany.

        • 0 avatar
          Big Al from Oz

          Why build expensive GMs in Canada? GM is not competitive in the EU. NA (other than Mexico) build more expensive small cars than the EU with greater subsidies going to US and Canadian operations.

          GMs can be built in Thailand, China, Sth Africa, Brazil and even Korea. Mexico would be ideal.

          The EU market would be more receptive of vehicles coming from these countries.

          GM’s US market can buy expensive Trump inspired “built” in Canada or the US.

          • 0 avatar
            Lorenzo

            Compared to German Opel legacy costs and dealing with German unions and state governments, Canada is competitive and has the trade deal, as well as a currency exchange advantage German Opel doesn’t have. GM can build elsewhere to ship to Europe, but do those plants have the trade deals to get through EU import rules, regulations and import tariffs?

    • 0 avatar
      samuelmorse

      I am afraid that current GM management team , led by Barra, is so shortsighted that they only seek a short term quick solution to the European losses, so easy way to get rid of the problem is to sell European operations and get some cash. They lack seasoned executives with international experience and are unable to find a real driver to reshuffle the European business, closing some factories and return Opel/Vauxhall to profitability. Exiting the European market is one more step to give up on a global market presence in order to gradually become a second rank exclusive American carmaker with presence only in America. Very sad.

  • avatar
    Big Al from Oz

    There is something I have noticed. A trend in corporate and business modelling of late.

    This is related to this potential GM deal to the deluded Trump view of business.

    Is the basic “American” business model/culture losing its steam? In other words not keeping pace with the competition?

    • 0 avatar
      Lorenzo

      The American business model has always featured adaptability to government rules and regulations. Too much of American free enterprise has become crony capitalism, with government conferring advantages to favored businesses. What you’re seeing is classic, all-American corporate sucking up to a new administration that promises to rewrite the rules of economic engagement.


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