The surprise announcement that PSA, holding company for the Peugeot, Citroën and DS brands, is in talks with General Motors to acquire GM’s European Opel and Vauxhall brands has set the cat among the pigeons in European capitals.
One of the first justifications for any major merger or takeover is the opportunity for cost reduction from economies of scale and consolidation. PSA’s interest in the Opel/Vauxhall brands has some logic to it.
Constructeur Automobile Mondial?
Acquiring the brands would catapult PSA into the major league, closer to Volkswagen and Fiat in terms of automobile sales volume. Not surprisingly, the French publication Le Monde was one of the first to cover the story in depth (site est en francais, mes amis). As the newspaper explains, for GM, Opel and Vauxhall make up only 12% of the company’s production of roughly 12 million vehicles a year, but for PSA an additional 1.2 million units on top of the existing 1.9 million should create considerable opportunity for economies of scale, at least in the European market where PSA currently sells 1.9 million vehicles out of a total production of 3.1 million worldwide.
The worry in European capitals, though, is that those economies will be achieved by closing production facilities. With PSA 14% owned by the French government and Opel a major employer in Germany, the telephone lines between Paris and Berlin have no doubt been humming seeking reassurances that if European approval is to be given, no job losses will result in Germany or France. Read more