Cleveland, Ohio – PSA Groupe CEO Carlos Tavares shared some of his thinking on why the parent company of Peugeot Citroen should buy General Motors’ Opel and Vauxhall brands. He sees three major motivators for the deal.
- Nationalism – Many German and British car buyers would never consider a French car (and many French would never consider a German one), so despite offering similar products in the same geographic reason, there’s a lot less competition between the companies than you might think.
”We have customers, who despite all of the progress we have done, do not consider French brands,” Taveres said Thursday in a Q&A session following the company’s earnings announcements. “They will consider German brands, based on the Halo effect of the German premium brands.”
- Globalism – PSA Groupe gets the bulk of its earnings in France and virtually all of its revenue in Europe. With the extra capacity from Opel, it could become a major exporter with the United States being a prime target market.
“It is absolutely possible to sell Opel cars outside of Western Europe,” Taveres said. “If we are competitive in terms of quality and cost, it is a big opportunity for all of Opel's workers and plants.”
- It’s necessary – Opel has lost money for a decade, and shows little promise of dramatic improvement without changing how it operates. PSA Groupe has spent the past four years going through a similar restructuring and is now profitable. Taveres said PSA can apply its turnaround approach to Opel, and it should get an eager partner because European governments, unions, and dealers know that the red ink can’t continue forever.
“We are now healthy. We are profitable. We generated significant cash flow. We are still growing,” Taveres said. “We’ve always said, as soon as we were in good health, we would pursue strategic opportunities… The opportunity is very simple. This company (Opel) has been making red ink for 10 years, approximately burning 1 billion Euros of cash per year. We think there is an opportunity to make a European car champion, coming from this combination.”
The key is a European champion – a combined company that would sell equally well in France, Germany, or Spain. Tavares said he envisions a company that would take a premium feel to global markets, creating opportunities for growth.
Despite several questions about cost cutting, he said the value in the deal would be in fixing and growing Opel, not slashing costs – though overlapping vehicle platforms would likely be shared early, creating some quick synergies on the design side, he added.
Taveres stressed that talks are still ongoing, but he implied several times that a deal was close.
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.