MarketLine Blog

From GM to PSA: Why the sale of Vauxhall Opel is good for shareholders but bad for workers

US-based General Motors is the world’s third largest automobile manufacturer by sales, and second largest by revenues. French-owned Groupe PSA, which sold nearly 3.2 million vehicles and had revenues of €54bn ($57bn), is a fairly small player in comparison. GM’s ownership and continued management of Vauxhall Opel is at odds with the rest of its portfolio – the company primarily operates in the US and Asia, selling brands including Chevrolet, Buick, Holden and Wuling – while PSA operate Peugeot, Citroen and DS Automobiles primarily out of Europe.

The sale of Vauxhall Opel to PSA therefore makes perfect sense. PSA can benefit from consuming a competitor, helping it survive in a heavily saturated market, and will also enjoy the increased efficiencies – through economies of scale – that come from company expansion and acquisition. And as GM has struggled to turn a profit with Vauxhall Opel – having not generated a profit since 1999 – it is about time that it swallowed its pride and admitted defeat.

As with any acquisition of a smaller company by a larger one, it would be naïve not to expect job losses – or “streamlining”, as executives will insist it is called. It is simply a question of where the job losses will hit, rather than if they will hit. Vauxhall has several large production sites across Europe, primarily focused across Germany, Poland, Spain and the UK. Unfortunately, it seems most likely that job cuts will hit the UK; Germany is simply too good at making cars, Poland has managed to provide incredibly competitive price levels without sacrificing quality, and PSA relies too heavily on Spain’s production of the Corsa, one of the world’s most popular cars. The UK, however, is on the brink of an economic disaster – no one knows exactly how Brexit will affect the UK economy, but chances are it won’t be pretty. PSA has pledged to honor job guarantees put in place by GM, which – if honored – means no job losses until the end of the decade. In 2020, with Brexit looming, job guarantee deals expiring and the Astra ready for a new model, it is unlikely that there will be many Vauxhall factories still open in 2020’s Britain.

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