PSA Buys Opel/Vauxhall from GM Europe

The Viva; the first car to be manufactured at Vauxhall's plant in Ellesmere Port 

Well this was news that took me rather by surprise!
Although PSA and General Motors have been working on joint ventures for a few years now, (the first fruits of which will be hitting showrooms shortly in the shape of the Vauxhall/Opel Crossland X), I wasn't expecting a deal to be struck that will see PSA buy General Motors (GM's) European operations. After all, it was only a few years back when GM were seriously considering buying out the PSA Group; custodians of the Peugeot, Citroen and DS brands when they took a 7% stake. Ultimately, surely this is a prime example of how quickly things move on in the motor industry.
The tables have since very much turned. PSA were part bailed out by the French government and Chinese automaker Dongfeng a few years ago resulting in a far more efficient and revenue generating organisation following a bout of cost cutting and reorganisation implemented by head Carlos Tavares. Meanwhile, GM's European operations have continued to lose money. Indeed, the last full year Opel/Vauxhall made a profit for GM was back in 1999.
Why is this? Well, a lack of manufacturing efficiency is one reason. GM's European factories haven't been running at full capacity which effectively means less revenue is being made from each plant. Although sales of Opel/Vauxhall vehicles is respectable, (particularly in Britain under the Vauxhall brand), the demand Europe-wide hasn't been enough to increase the number of cars being built at each manufacturing plant.
Rather heavy discounting and less revenue per unit has been another long running problem at Opel/Vauxhall whilst expensive pension obligations and a lack of international demand outside of the European market have all contributed to General Motors decision to quit this market for good.
It's a momentous decision, (indeed Vauxhall has been part of GM since 1925). It will have big implications for the motor industry and certainly for Europe's automotive landscape and pecking order.
Last year, Vauxhall/Opel jointly sold approximately 1.0 million vehicles in Europe whilst PSA sold more at 1.5 million. Following this £1.9bn deal, PSA will be Europe's second largest automobile manufacturer, behind only the mighty Volkswagen Group.

Peugeot's Instinct concept, seen here at this year's Geneva motor show

It's clear why Carlos Tavares is keen to take control of Opel/Vauxhall. With GM Europe currently enjoying a fair market share, ownership will allow PSA to increase their footprint and enable greater economies of scale to take effect. As an example, future generations of Astra and Insignia will be able to be built of the same platforms as the next generation 308/508 model lines. With the high cost of research and development, (particularly with new powertrain and autonomous technologies around the corner), PSA will be able to make greater returns on investment with more units being produced sharing the same platforms and architecture. Hopefully for PSA, this will allow for greater profitability whilst cutting such development costs. I expect the French firm will also be very pleased to get their hands on GM's electric vehicle technology; an area where PSA have been lagging behind competition from the likes of Renault, Nissan and Hyundai.

PSA will benefit from technology used in the electric Opel Ampera E; a car based heavily on the American market Chevrolet Bolt 

Perhaps understandably, such a deal is already raising heavy concerns with many currently employed by Vauxhall/Opel. Cost cutting will almost certainly be necessary to trim the overcapacity crippling profitability at GM Europe. It isn't beyond the realms of possibility that in the medium term PSA may look to close some Opel/Vauxhall factories so as to better streamline manufacturing bases and increase production efficiency.
Although Vauxhall's plants at Luton and Ellesmere Port are reasonably efficient, there are many questions being raised about their future. Is the cost of manufacturing cars in the UK where the majority of parts come from a supply chain based more heavily in Europe mean that production moves abroad? What about concerns over Brexit? Will future Vauxhall/Opel Vivaro vans switch from Luton to France where they can share manufacturing capacity with the Peugeot Expert/Citroen Dispatch? Time will invariably tell; however, I expect that many Opel/Vauxhall factories and European governments will begin to lobby PSA in order to avoid the closure of their plants.

The last Peugeot to be produced at PSA's Ryton plant in Warwickshire

Unfortunately for Vauxhall, PSA have form when it comes to shutting down UK manufacturing bases. Peugeot closed down the British Rootes Group operations in the mid 1980's and more recently in 2006 closed the Ryton plant near Coventry; home to cars including the Peugeot 309, 405, 306 and 206. Ultimately times change and it'll be fascinating to see what happens over the next few years as the ramifications of this deal unfold...