Motor City Blogman

Why GM May Finally Sell Opel to Peugeot-Citroen

Hint: Think Brexit and Vauxhall

After five years and three European projects “generating substantial synergies for the two groups,” General Motors may finally be close to a deal to sell Opel/Vauxhall to PSA Peugeot-Citroen. The deal would all but remove GM from the European Union, save some low-volume Cadillac and Chevrolet Corvette business, and make Peugeot-Citroen Europe’s second-largest automaker after Volkswagen Group. This also could help PSA achieve its goal of bringing some form of Citroen, possibly the sub-brand DS, back to the U.S. market within the next decade.

“Within this framework, General Motors and PSA Group regularly examine additional expansion and cooperation possibilities,” beyond their 2012 alliance, the two automakers said in a joint statement released after Bloomberg reported a deal was in the works. “PSA Group and General Motors confirm they are exploring numerous strategic initiatives aiming at improving profitability and operational efficiency, including a potential acquisition of Opel Vauxhall by PSA.”

The statement concludes, “There can be no assurance that an agreement will be reached.”

Opel Insignia Grand Sport rear side

Rumors that PSA would buy Opel/Vauxhall from GM date back to the beginning of the decade, as GM, fresh out of a federal government-forced bankruptcy, was closing down Pontiac while trying to sell Saab, Saturn, and Hummer. After the alliance was formed, GM’s European brands struggled to stem losses during a lingering recession in Western Europe, even as the U.S. market was recovering on its way to record sales in 2015 and ’16.

Even before the EU market finally began to recover, Vauxhall was already a stronger brand [in a much smaller market], compared with Opel. Vauxhall is the U.K.’s second-bestseller after Ford and ahead of Volkswagen, BMW and Audi, according to Felipe Munoz, global automotive analyst at the European firm Jato, while Opel/Vauxhall is fourth-largest in the EU overall, behind VW, Renault and Ford, and ahead of Peugeot.

Now Vauxhall has to deal with Brexit. It has just two manufacturing sites remaining in the U.K.; Ellesmere Port, which produces the very popular Vauxhall Astra five-door and Astra Sport Tourer, and Luton, which builds the Vivaro commercial van. Other European plants are in Germany, Austria, Spain, Poland, and Hungary.

Once Great Britain exits the EU, Vauxhall will be at a great disadvantage in exporting the Astra and Vivaro throughout the remaining European Union, and in importing models into the U.K. It looks to me like Vauxhall could be reduced to a commercial van brand at best, or even be cut altogether if PSA becomes its new owner.

In its fiscal year 2016 earnings report, GM posted net income of $9.4 billion on global revenues of $166.4 billion, but lost $0.3 billion in Europe. Best it could do is boast of reducing losses at GM Europe by $0.6 billion when compared with 2015.

Opel Insignia Sports Tourer rear side in motion

“Without the negative $0.3-billion impact of Brexit, GM [Europe] would have achieved its objective of breakeven for the year,” it said in the report released February 7.

This should serve as a warning to the Trump administration, which apparently intends to force North American capacity to move back into the U.S. by tearing up the North American Free Trade Agreement. Such a move would potentially isolate U.S. production as Mexico, with its plethora of free trade deals, continues to sell American- and foreign-brand autos to the rest of the world.

As for the future of the Buick Regal, and GM’s global architectures, the sale of Opel/Vauxhall only means that GM and PSA Group will continue to share platforms for at least the remainder of the current generation. Jato’s Munoz believes the Citroen Aircross replacement concept that makes its debut at the Geneva show next month will “share many things” with the Opel/Vauxhall Crossland X.

Vauxhall VXR8 front three quarter

“Citroen needs this car in order to improve its presence in the segment, as the C4 Cactus registrations posted a 10.2-percent decline last year, while the segment grew by 17.5 percent,” Munoz says.

Cross-pollination also helps Peugeot-Citroen achieve its goal of returning to the U.S. market with new models that could share Opel/Vauxhall platforms already designed to meet U.S., as well as European crash, emissions, and CO2 standards.

In Europe, the midsize segment is secondary to the compact segment, and as in the U.S., it’s losing ground to compact sport/utilities anyway.

If the next Buick Regal doesn’t get the new Opel/Vauxhall Insignia’s handsome sheetmetal, that might be a good thing. Here’s my latest chance to campaign for a production, four-door Avista on the rear-wheel-drive Alpha platform, which would leave the Encore and the Cascada as the last Buicks dependent on Opel/Vauxhall. If the Avista replaces the low-volume Cascada as the halo, Buick pretty much doesn’t have to worry about what happens to GM’s Anglo-Saxon brands. The sport/utility boom is pushing most sedans into niche-model status anyhow, so why not reject the new Insignia design and make what’s already a niche sedan for Buick something truly special?

Buick Avista concept front three quarter 3

Comments

We’ve Temporarily Removed Comments

As part of our ongoing efforts to make AutomobileMag.com better, faster, and easier for you to use, we’ve temporarily removed comments as well as the ability to comment. We’re testing and reviewing options to possibly bring comments back. As always, thanks for reading AutomobileMag.com.