PSA group purchase of Opel and Vauxhall complete with a new financial of the company

The PSA Group, Citroën DS and Peugeot cars, has completed the purchase of the Vauxhall and Opel brands.

The final details in the realization of the whole and the combination of the companies ‘ financial arms, Opel Bank, Opel Financial Services, and Vauxhall Finance, with the collaboration of the financial giant BNP Paribas. The newly acquired financing company of Vauxhall and Opel will sit alongside the existing PSA Financing arm, Banque PSA Finance. Around £8.4 million of finance was tied up in the Vauxhall and Opel financing companies at the end of last year.

The £1.9 bn consists of GM’s Opel/Vauxhall subsidiary and GM Financial’s European operation, valued at £1.2 million and £800 meters, respectively.

The measure, which was first announced in March, makes PSA the second best-selling car in Europe after Volkswagen. Enlargement of the PSA now has a 17% share of the European market.

After the announcement this morning, PSA said that it would submit a detailed business plan for Vauxhall and Opel in early November, and added that the intention was to return to the two brands of profit. Last year, they lost £200 meters. In a statement, PSA said that its intention of Vauxhall and Opel was to “generate a positive operational free cash flow by the year 2020, as well as an operating margin of 2% in 2020 and 6% by 2026”. Four PSA executives to join the Opel leadership team, which is led by the chief executive, Michael Lohscheller.

There is no word on the future of Vauxhall’s two plants in the uk at Luton and Ellesmere Port. A Vauxhall spokesman said the Coach was “business as usual” at the time.

Group PSA chief Carlos Tavares, said: “We are witnessing the birth of a true champion of europe at the moment. We’re going to help Opel and Vauxhall to return to profitability and the objective to establish new benchmarks for the industry as a whole. Let’s unleash the power of these iconic brands, and enormous potential of their talents. Opel will continue to be German, Vauxhall is going to continue being British. They are the perfect complement to our portfolio of French brands.”

Lohscheller said Opel is “willing to build the [company] plan of PSA support”, and added that the economies of scale and synergies in the process of purchasing, manufacturing and R&D could help the new group to save an estimated £1.5 million each year.

A more agile management structure will be implemented, ” said Lohscheller: “We are reducing the complexity and increasing the spreed. I am waiting for the conformation of the next chapter of Opel/Vauxhall, with the new management team and leading our company into a successful future. The owners and employees will not be the only ones to benefit from the ever stronger Opel and Vauxhall brands so that our customers do too.”

This confirmation follows the announcement last month that the European Union, the authority of the defence of “unconditionally” approved PSA plans to buy Opel and Vauxhall, concluding that “the transaction did not arise problems of competition”.

The PSA Group sold 3.5 m cars worldwide last year, and Vauxhall/Opel sold 1m.

PSA has been previously stated, the decision allowed him to support from all over the world, profitable growth, while General Motors, current owners of the Vauxhall/Opel brands, said that “the progress of GM’s transformation and unlock value for shareholders through disciplined capital allocation”.

In a press release confirming the purchase in March, the Group PSA chief Carlos Tavares said that the eps respect existing brand identity and to “help accelerate [Opel] change,” in reference to their recent struggles; last year, lost £200 meters.

“We are proud to join forces with Opel/Vauxhall and we are deeply committed to continue developing this great company and the acceleration of its delivery. We respect all Opel/Vauxhall talented people have been reached, as well as the company of beautiful brands and strong heritage. We intend to manage the PSA, and the Opel/Vauxhall the capitalization of their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner for you. We see this as a natural extension of our relationship and are willing to take it to the next level.”

“We are confident that the Opel/Vauxhall change will significantly accelerate with our support, respecting the commitments assumed by GM for Opel/Vauxhall employees,” continued Tavares.

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GM chief Mary Barra, said at the time: “For GM, this represents another important step in the work-in-progress is the engine of our improved performance and the acceleration of our momentum. We are remodeling our business and delivering consistent, record results for our owners through disciplined allocation of capital to our highest return investments in the core of our automotive business and in new technologies that allow us to lead the future of personal mobility.

“We believe that this new chapter makes of Opel and Vauxhall in an even stronger position for the long term and we hope that our participation in the future success and strong value-creation potential of PSA through our economic interests and the continuation of the collaboration in the current and the new and exciting projects.”

The collaboration between the two companies is likely to include the use of the electrification of the existing technologies and contracts for the supply to Holden, and certain models of Buick. PSA can also be a source of fuel cell systems for GM/Honda joint venture.

Opel/Vauxhall will also continue to benefit from the licensing of intellectual property of GM until their vehicles to convert to PSA platforms in the next few years. This suggests that, as the Opel/Vauxhall models reached the end of its current life – for example, the Astra is due to be replaced in the year 2021 – the vehicles that will pass PSA platforms. If this is the case, then the current of the cycles of production will be maintained and this would be the insurance of Opel/Vauxhall plants in the uk were safe, at least until 2021.

“We believe that the only thing that really protects [our employees in each brand] is your ability to be at the right level of performance,” added Tavares, suggesting uk plants could survive if the performance continues to grow.

He added: “We do not need to close the plants. If you look at the trajectory of PSA over the past few years, the number of the improvement of the efficiency of our plants, it is a fact to say that since I took the helm of PSA do not have near the plants.” He added that it would improve the efficiency of the GM plants, but did not elaborate further.

Meanwhile, Tavares told investors and analysts that a so-called hard Brexit could create an opportunity for PSA if you keep the two uk-based Vauxhall/Opel plants.

“Vauxhall/Opel was prevented until now to sell abroad,” said Tavares. “There is a potential export opportunity for us. There is also the Brexit and the risk and the opportunity of having within the united kingdom some of the manufacturing plants in the event that we have a hard Brexit. All of this represents opportunities that we want to tackle.” Car makers fear that leaving the European market will be the result of applying the tariffs to the import and export of vehicles to Britain. If Peugeot were to have a car factory in Britain, it was going to exceed these rates.

Speaking on the issue of Brexit, he added: “No one knows how it will develop. It is hard or soft. If it is soft, we are all in the performance. Perhaps an opportunity will be strengthened by the weakness of the pound. If it is a hard Brexit, perhaps it will be an opportunity to source the united kingdom in the united kingdom [save the entire chain of production in the uk to remove the export/import of the costs, so that the cost structure will be more in pounds.”

Meanwhile, Bar’s fault Brexit for Vauxhall/Opel’s precarious position: “it is clear That the team [Vauxhall/Opel] would have given the target to break even in 2016, had it not been for Brexit.” Opel has said previously Brexit cost is around £536m last year, in a total loss.

Commenting on the sale, uk Business Secretary Greg Clark said: “Vauxhall has a long history of success in this country and we are determined to see that continue. The Government welcomes the assurance of PSA that is to honour the commitments made by GM Vauxhall employees and retirees. We will continue to participate and work with the PSA in the weeks and months ahead to ensure that these guarantees are maintained, and will be based on the success of both sites for the long-term.

The purchase includes all of Opel/Vauxhall automotive operations, which includes Opel and Vauxhall brands, six of the assembly and five components of production facilities, an engineering center and approximately 40,000 employees. GM will retain an engineering center in Turin, Italy, which is a diesel power train R&D center and the home of the so-called Whisper diesel.

PSA does not assume any responsibility for the existing Opel/Vauxhall pensions – which has been a major point of controversy since GM’s main deficit of the pension. All of Opel/Vauxhall in europe and united kingdom pension plans, with the exception of some small plans that will be transferred to PSA, will remain with GM. GM is going to pay for PSA £2.7 bn to resolve the transfer of the pension obligations for these plans under.

How the sale could impact on Vauxhall’s uk manufacturing plants

The prime Minister, Theresa May has already spoken to Tavares about Vauxhall in the united kingdom of the plants, as well as a shared desire to “protect and promote” the jobs associated with them, according to a government spokesman.

However, there is still uncertainty over the consequences on jobs in the united kingdom since Tavares’ confirmation of the reduction of plan costs in order to achieve economies of scale.

If the current production cycles to stay in the place, one of Vauxhall in the uk of the plant, Ellesmere Port, it is safe for the current generation Astra production, which will run until the year 2021. The other, in Luton, which builds the Vivaro van, would be safe until 2024, under these conditions.

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The future of the plant, as well as Vauxhall’s other factory at Luton airport, has been under scrutiny after the news that the PSA, owner of Peugeot, Citroën and DS, I was interested in taking a majority stake in Vauxhall and its European counterpart Opel.

With plants in Europe are running at 80% capacity and Vauxhall planning to introduce two new Suvs this year, the Crossland X and Grandland X, it would not be feasible to move production of the Astra model to another European factory in the short – medium term. However, if the deal goes ahead, the future Astra models can be put on the same platform as the Peugeot 308 hatchback – to the point that the car could be built in another place. With the current generation Astra is expected to sell for at least four more years, this suggests Ellesmere Port will continue in his current capacity until at least 2021.

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GM Vauxhall plants in Ellesmere Port and Luton collectively employ 4500 staff, while thousands more work in Vauxhall’s uk showrooms and the supply chain.

Similar fears exist in Germany with the Opel brand. However, the PSA has previously said Opel will continue to be a German company if the acquisition is completed, and the reports indicate PSA chief Carlos Tavares, you could keep the current structure of management of Opel in the place.

Even before the sale to PSA, Opel’s European boss, Karl-Thomas Neumann is believed to have created a plan to reinvent Opel and Vauxhall as an electric car brand for the year 2030, with the base models of all of the modular electric car platform used for the Chevrolet Bolt.

In a letter to Opel and Vauxhall employees when the news first broke, GM chief Mary Barra, asked for understanding and approval of the possible sale of GM Europe operations, including Opel and Vauxhall brands.

The sale of “enable the PSA Group and Opel/Vauxhall to improve its position in the fast-changing European market, due to the complementary strengths of both companies,” said Bar in the letter, adding that “we will do everything possible to ensure the interests of all parties are respected”.

How the deal unfolded, and the position in the market of Vauxhall and Opel

The story came to light in the last week of February that GM was in negotiations for the sale of its operations in europe.

PSA confirmed that it was in direct dialogue with the GM, but he refrained from revealing how far the talks would go. Said in a statement: “PSA Group confirms that, together with General Motors, is the exploration of numerous strategic initiatives with the objective of improving its profitability and operational efficiency, including a potential acquisition of Opel. There can be no assurance that an agreement will be reached.”

GM responded with a nearly identical comment: “Since the year 2012, General Motors and the PSA Group has been the implementation of an alliance that covers, to date, three projects in Europe and the generation of significant synergies for the two groups. Within this framework, General Motors and the PSA Group to regularly examine additional of expansion and possibilities of cooperation, as well. PSA group and General Motors confirm that they are exploring numerous strategic initiatives aimed at improving profitability and operational efficiency, including a potential acquisition of Opel Vauxhall by PSA. There can be no assurance that an agreement will be reached.”

GM has been especially active in recent years in the search of a broad base of cooperation with Peugeot in an attempt to reduce costs and improve profitability at Opel and Vauxhall.

In the framework of his partnership, Opel has developed two new SUV models existing Peugeot platforms. They are the new Crossland X, which is located in the same structure as that of 2008, and the Grandland X, whose foundations are shared with the 3008. A large SUV model, designed to replace the Zafira, is also provided, although based on the same in the house of the GMs platform as the second generation of the Badge.

However, a true fusion between the car and the giant PSA and was torpedoed in 2013, when GM suddenly sold a 7% stake in the French government-owned automaker.

The purchase of Opel and Vauxhall made PSA the second-largest car manufacturer in Europe, with a potential annual sales in europe of more than 2.4 million and a healthy 17% share of the market. This enables you to overcome Renault, and place it behind only the Volkswagen Group in terms of sales in europe to reach.

In 2016, the French car manufacturer of three brands, Peugeot, Citroën and DS reserved 1,446,052 sales, and Opel reported that the sales of 979,427. By comparison, Renault 2016 European sales amounted to 1,496,394, helped by the continued success of its Dacia brand. The Volkswagen Group with its Audi, Bentley, Bugatti, Lamborghini, Porsche, Skoda, Seat and VW brands, pulled in 3,498,049 sales.

The Vauxhall brand, bought by GM in 1925, currently represents around a fifth of Opel’s sales, with the uk traditionally to be the biggest market for the Corsa and the Insignia. However, its future under the possible control of PSA raises some uncertainties. A scenario already mentioned by GM sources in the discussion with the Coach is the possibility of a sweeping consolidation of Vauxhall operations in the uk, with the brand name being consigned to history and replaced by Opel, a move that was seriously considered by the GM of the financial crisis of 2009, but finally decided against it.

Fighting for the profitability of General Motors in Europe

GM’s European operations have been profitable for the last 16 years, with the combination of the losses put at more than $ 6.9 million since 2009. The US car giant initially expected a return to profitability in the year 2016. However, a devaluation of the pound sterling and the cooling of the sales in the uk after Brexit vote is that you are claiming as unexpected result in currency losses in 2016, leading to an operating loss in the Opel of £194m last year.

PSA yes came close to bankruptcy in 2013, after years of mounting losses. In a company, the cost-saving measure, the Peugeot family was forced to sell 25.6% of its stake in the French car maker, with 12.8% goes to the French government, and 12.8% of Peugeot’s Chinese joint-venture partner, Dongfeng. Each one paid more than £800,000 to his part of the company. Shortly after, PSA, sought a strategic alliance with Opel, with a view to the joint preparation of a number of key platform architectures – a move that led to both the establishment of a close working relationship and the foundation for the purchase of the negotiations.

Despite PSA’s financial rehabilitation through the creation of the key holdings by the French government and Dongfeng, and the sweep of cost reduction initiatives instigated by his Portuguese-born-in-chief Tavares, PSA grip in the European market has surged in recent years.

In 2010, the French car maker caught a 13,1% market share in Europe. However, this was reduced to 9.9% in 2015, placing it behind rivals Renault. But while Peugeot’s market share has been eroded by the increased competition, its share price has more than tripled, placing it on a more solid financial base, which at any time during the last two decades.

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