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Written by Paul Horrell
PSA, maker of Peugeot, Citroen and DS, is in talks with GM to buy Opel and Vauxhall. Both sides have issued statements confirming this, but also saying that this outcome isn"t inevitable: "There can be no assurance that an agreement will be reached."So why would PSA buy Opel and Vauxhall? Because if it managed to keep hold of all the combined market share, it"d become the second-biggest car maker in Europe after the VW Group.Car-company bosses regard bigger as better. The development costs of several differently branded cars can be spread across fewer platforms and engines. And also when buying raw materials and components, the bigger the purchased quantity, the lower the price.Viewed from the other perspective, it"s easy to see why GM might want to be rid of its European arm. It doesn"t make any profit in this continent, and hasn"t for more than a decade. Its losses were small in 2016 than before, but it has said the slide in sterling following the Brexit vote will cost it hundreds of millions this year. So Opel-Vauxhall won"t make money in 2017 either.However, there are strong countervailing factors why the deal might not make enough sense.For a start, Peugeot would have to be quite sure it isn"t buying into the disaster of having to close factories. There are too many plants in Europe. If they aren"t operating at full stretch they lose vast sums of money. If Europe"s new-car market were to fall (and the economic signs aren"t positive at the moment), the new combined entity would be vulnerable. Opel has a huge plant in Germany, where labour costs are scarily high.For GM, selling its European arm would mean its losing a vast reserve of expertise in designing small engines and cars. That"s small in American terms anyway.The Astra, Mokka X and Insignia (pictured above) are all sold in the US as Buicks. Many other GM cars around the world use engines and other systems designed in Europe.I suspect the low oil price has pushed GM into looking at this sale. It"s making good profits selling big cars and trucks in North America. Its shareholders probably don"t think it needs the costly European unit. If the oil price were to spike up, the fuel-efficient European-designed cars and engines would suddenly become more important in GM"s American portfolio.It could be that the new combined European entity could continue designing and building cars to GM in North America. That would give Peugeot the beginnings of a chance to re-enter a country it had to abandon in the days of the 405.
Date written: 14 Feb 2017
More of this article on the Top gear website
ID: 6741
PSA, maker of Peugeot, Citroen and DS, is in talks with GM to buy Opel and Vauxhall. Both sides have issued statements confirming this, but also saying that this outcome isn"t inevitable: "There can be no assurance that an agreement will be reached."So why would PSA buy Opel and Vauxhall? Because if it managed to keep hold of all the combined market share, it"d become the second-biggest car maker in Europe after the VW Group.Car-company bosses regard bigger as better. The development costs of several differently branded cars can be spread across fewer platforms and engines. And also when buying raw materials and components, the bigger the purchased quantity, the lower the price.Viewed from the other perspective, it"s easy to see why GM might want to be rid of its European arm. It doesn"t make any profit in this continent, and hasn"t for more than a decade. Its losses were small in 2016 than before, but it has said the slide in sterling following the Brexit vote will cost it hundreds of millions this year. So Opel-Vauxhall won"t make money in 2017 either.However, there are strong countervailing factors why the deal might not make enough sense.For a start, Peugeot would have to be quite sure it isn"t buying into the disaster of having to close factories. There are too many plants in Europe. If they aren"t operating at full stretch they lose vast sums of money. If Europe"s new-car market were to fall (and the economic signs aren"t positive at the moment), the new combined entity would be vulnerable. Opel has a huge plant in Germany, where labour costs are scarily high.For GM, selling its European arm would mean its losing a vast reserve of expertise in designing small engines and cars. That"s small in American terms anyway.The Astra, Mokka X and Insignia (pictured above) are all sold in the US as Buicks. Many other GM cars around the world use engines and other systems designed in Europe.I suspect the low oil price has pushed GM into looking at this sale. It"s making good profits selling big cars and trucks in North America. Its shareholders probably don"t think it needs the costly European unit. If the oil price were to spike up, the fuel-efficient European-designed cars and engines would suddenly become more important in GM"s American portfolio.It could be that the new combined European entity could continue designing and building cars to GM in North America. That would give Peugeot the beginnings of a chance to re-enter a country it had to abandon in the days of the 405.
Date written: 14 Feb 2017
More of this article on the Top gear website
ID: 6741
