Commentary: GM – Opel/Vauxhall + PSA = ???

Carlos Tavares (L) of PSA Groupe and Mary Barra (R) of General Motors announcing the deal – Photo (c) GM

Just before PALEXPO opened up to the world's automotive media for the 87th Geneva International Motor Show, there was some major news to report.

General Motors and the PSA Groupe – the parent firm of Peugeot and Citroen – agreed to a $2.3 billion transaction sending Opel and Vauxhall into French hands. PSA will get all of the operations involving Opel and Vauxhall, including the Russelsheim engineering center, six assembly facilities, five component production sites, the operations of GM Financial Europe and the employment of 40,000 people.

The potential results of this transaction gives PSA a 17% market share in Europe – second largest in that region. It gives a greater base for PSA to leverage the assets of Opel and Vauxhall towards better operating margin improvements, along with adding more context to their overall product plans. By adding Opel and Vaxuhall to the Peugeot/Citroen/DS portfolio, PSA Groupe could deepen their mainstream product choice available to European customers.

On GM's side, the $2.3 billion transaction infusion will help deepen investments already under way under Renaissance Center's leadership. It also helps in facilitating the company's transformation through their mobility efforts and product development.

It all sounds great. However, there are some questions that needs to be addressed on both sides of the transaction.

For PSA Groupe, how much of a commitment will they make on Opel/Vauxhall? One would hope they would continue both brands as counterploy to Volkswagen Groups' expansive portfolio – including SEAT and Skoda. With Peugeot, Citroen and DS adding Opel and Vauxhall, it gives PSA another set of unique products to sell across Europe – including Russia and Turkey.

What could possibly happen in the future is based on some history. One, when Citroen was absorbed into Peugeot as PSA, we saw a lot of platform sharing and even badge engineering. As a lot of Opel and Vauxhall vehicles use GM platforms, you can be assured they will go away with every new generation model. This will take years, mind you.

One good thing that came out of the Peugeot-Citroen tie-up is design autonomy. Citroen has its own flair of doing things. It is seen in their DS products, as well as the C4 Cactus. This could give Opel/Vauxhall some design autonomy, even if their next products are built on PSA platforms.

There could be another possible situation also rooted in history that could affect Opel/Vauxhall under PSA. Let me bring up Talbot, the former Chrysler Europe unit sold to PSA in 1978. Chrysler fused Simca and the Rootes Group together, similarly to what Ford did to their European units. When Chrysler began to fail across Europe, in came PSA. They rebadged the vehicles as Talbots. This lasted for several years until the Express Van was nixed in 1994.

It is of note that an Opel/Vauxhall has already taken on a PSA platform – the recently introduced Crossland X. It is being built on the same platform as the Peugeot 2008 and Citroen C3 Picasso.

In the meantime, a key replacement for the small Talbot hatches – the Horizon – was supplanted by Peugeot's 309. Therefore, Peugeot production took over Talbot at the Rootes' old Ryton plant in the UK in the mid-1980s. That plant closed in 2007.

Since we saw that PSA could not handle a third brand sold in the same segment in the past, could that mean the end of Opel and Vauxhall? Would that also reintroduce Peugeot production to the UK at the Ellesmere Port – the home of the Astra. It also gives PSA access to key assembly plants in Germany, Poland and Spain – to name a few countries. Again, it depends on a future product mix and if there is a form of autonomy at Russelsheim for Opel/Vauxhall design and engineering under PSA's ownership. History might not be too kind to Opel/Vauxhall, however.

Another potential concern for PSA is Brexit. With access to facilities in Luton and Ellesmere Port, PSA could take a larger role in UK operations if (and when) it separates from the European Union. It could almost guarantee a return of UK production of Peugeot vehicles. That guarantee could come in the form of the proposed tariff based on the terms of the exit from the EU. That possible tariff will have a negative affect on all vehicles – not just the remainder of the PSA Groupe's portfolio – imported into the UK.

Over at GM, losing Opel/Vauxhall may be a great windfall into the coffers at RenCen. However, there are looming issues in terms of product to resolve. Losing Opel/Vauxhall will affect Buick and Holden.

How? Buick might not be as affected as one might see. All PSA might have to do is to run out the Cascada for a few years and end production of it. The Regal is at “end of life,” but sales have been lackluster overall. The solution may have to come from within GM – with help from China, of course – to create a new model replacing the Regal, Verano and Cascada to ensure a second car line to sell alongside the LaCrosse and the three SUVs.

However, Holden is in a pickle. It was leaked that the next Opel Insignia was to be the replacement of the large Commodore, but imported from Germany. Also, Holden already committed to importing the Astra and Cascada for the heart of their lineup. It may mean some intervention from GM to source products to fill these void when they come up.

Critical to Holden is the Commodore replacement. Though there is already a product portfolio more aligned with Chevrolet than Opel/Vauxhall, it could appear to be logical that a future Holden lineup will be heavy on North American products in the end. An Insignia-based Commodore could simply be won out by a Malibu or a further extension of the platform to a Buick LaCrosse-based vehicle. The Cruze will end up being imported again. It might not be all lost for Holden, if RenCen can resolve their lineup to maintain their presence in Australia.

I am only scratching the surface here. Talking product and branding are the most shallow things one can do in light of a transaction such as this. There should be concerns regarding assets – production facilities and other property – and the 40,000 employees PSA Groupe just inherited. How much longer will the French hold on these key components of the deal?

All eyes should be on Russelsheim and Paris as to what will happen with Opel/Vauxhall.

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