Thursday, March 9, 2017

An Update on PSA and Opel

Alexander Carabitses

(Image credited to Opel)

As predicted by just about everybody, including myself, the Opel/PSA deal has gone through, with the Opel and Vauxhall brands being sold to PSA for a mere 2.2 billion Euros.  The details of the deal are quite complicated, specifically with regards to how pensions will be paid off, with GM getting a $4-$4.5 billion write-down, while they also end up paying 3 billion pounds to PSA to cover whatever they don't hold onto.  The market deal is also complex, GM will buy 600 million pounds of PSA's stock for 1 pound per share, but will have to sell those shares after 35 days.  If share holders decide not to approve the deal, PSA will have to pay GM 600 million pounds over a 5 year period.

If you read that and understood it, I applaud you.

Now, if you read my previous article on this matter, you'll have good understanding of my concerns on the repercussions of the deal.  One of those concerns was the fact that GM would be leaving the third biggest market in the world, with the exception of Corvette, Camaro, and the few Cadillacs that GM manages to sell in the UK.  Of course, some people are now under the assumption that Chevrolet will become GM's new global brand due to the name recognition that it has across the globe; I think that this theory is quite logical. However, GM recently pulled the Chevrolet brand from Europe after a bold relaunch in the 2000s.  This is after GM tried as hard as it could to make Chevrolet relevant in Europe, but failed miserably and lost a crap load of money.  So that being said, why in the world would relaunching the entire Chevrolet brand in Europe be a good idea?  The name recognition didn't help as recently as late 2015, despite a well rounded lineup that competed in every major segment of the budget car market.

For those who are confused by what I mean when I say budget car market, let me clarify.  In Europe, market segments are different than those in the US, with our equivalent of a mainstream brand being a budget brand in Europe and our equivalent of a near-luxury brand being a mainstream brand in Europe (remember Buicks are near-luxury, but Opels are mainstream).  This is also why Fords seem to be a little more upscale here in the US.  

In the end, I think that we'll just have to wait and see, but given how long it will take Cadillac to make a comeback in its home market, I don't see that brand being relevant in Europe any time soon; therefore, the only way for GM to compete in Europe (which they will have to do at some point) is relaunch Chevrolet.  Just don't bank on them making money on that brand right out of the gate.  Also, I would not expect PSA to launch the Opel brand in the US, since PSA has given clear indication that, for now at least, Peugeot will be the staple brand for the company's relaunch in the US.  Opel will serve as a platform for the brand to garner more sales and market share in European markets that the company currently isn't dominant in.

That's all for now. Look out for my review of the 2017 Geneva Auto Show very soon and have a good end to your week.  

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