September 2, 2014

Vauxhall & Opel could merge with Peugeot Citroen.

GM Europe (Opel and Vauxhall) could extend their deal with PSA (Peugeot Citroen) with a Joint Venture or merger.

When GM Europe and PSA announced they were forming an alliance earlier this year, we asked if this was an admission that the mainstream car market in Europe had changed forever, and an alliance between Opel, Vauxhall, Peugeot and Citroen was the only way to keep the brands viable.

But we did also question what use a projected annual saving of €2 billion by sharing suppliers and co-developing platforms would be to PSA and GM considering their woeful losses. But it looks like bigger things are in store.

La Tribune are reporting that one proposal on the table is for Opel and Vauxhall to merge with Peugeot and Citroen in a European Joint Venture.

Under this scenario GM would take a 30 per cent share in the joint venture – which would mean GM not having to consolidate Opel/Vauxhall’s results thereby losing the biggest hole from its balance sheet – and inject cash in to the JV.

The problem is, sticking the two loss-making businesses together will be pointless unless the root of the problem – too much production capacity in Europe – can be addressed. And that’s a political minefield.

Germany will be a problem, but with a Socialist government now in  power in France that seems to believe the relationship between jobs and profits is irrelevant, the partnership could end up dumping the more efficient plants in Germany and the UK and keeping the less efficient plants in France. Which is not going to help their long-term prospects one jot.

Still, at least Opel/Vauxhall and Peugeot Citroen are trying to find a solution.

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