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Weekly News Review | 20 February 2017 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

Tavares ready to do what he does best

The out-of-the-blue news that General Motors could be selling its Opel and Vauxhall brands to the PSA Group is, when you look at it from GM’s perspective, not that surprising. The US automaker has been losing money in Europe since the beginning of the millennium and, with Britain’s decision to leave the European Union, has not seen the recovery it had initially predicted this year. It may seem surprising that PSA CEO Carlos Tavares is so optimistic of taking over GM’s struggling European arm, however there are many potential benefits for the French automaker in the long run.

If successful, the company that owns Peugeot, Citroen and DS would take a majority stake in GM’s European business, essentially leapfrogging the Renault-Nissan Alliance and snatching second place behind the Volkswagen Group in the European sales chart. In addition to this, PSA would also be able to push into the US market, a region that has been a long-term goal for the automaker. Through Tavares’ prominent management, PSA has returned to profit through its ‘Back in the Race’ scheme and is now experiencing sustainable growth - something once dubbed an impossible task. Looking forward, PSA sales would gain an extra million vehicles a year from the GM acquisition which would be a welcome addition to the group’s future plans. Nothing has been confirmed at present, however both PSA and GM issued a statement last week that confirmed the two are “exploring numerous strategic initiatives aiming at improving profitability and operational efficiency, including a potential acquisition of Opel Vauxhall by PSA.”

PSA may be licking its lips over the acquisition, although Tavares will have a lot of work to do if he wants to see profit anytime soon. As mentioned, GM has seen a great loss in recent years - approximately £1.3 billion over the last three years - so it is unsurprising that it is keen to hand over its suffering European division as soon as possible. If not, the company would also have to redevelop its diesel engines for cleaner alternatives, which would most likely make its smaller vehicles too expensive in the future to compete with rivals in the region.

By taking on GM’s troubled European division, PSA would need to undergo significant cutbacks on facilities, jobs and R&D at Opel and Vauxhall, due to overcrowding at the PSA group. GM’s future vehicles will probably be re-launched on PSA platforms whilst its R&D will be drastically reduced, which could instantly overcome the debt brought on through the takeover. Certainly, this will be a troublesome task for PSA. Although, if you want to cut costs, Tavares is the man for the job.

Alex Kreetzer

Alex Kreetzer - Digital Editor

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