PSA-Opel deal gets support in Germany, UK and France

Carlos Tavares has been given a thumbs up by the German, French and British authorities for his plan to form an alliance with Opel. Indeed, rather than a take-over or fusion, the CEO of the Peugeot-Citroën-DS group sees PSA and Opel forming an alliance – perhaps inspired by competitor Renault-Nissan.

In any case, Tavares wants Opel to remain a separate, truly German brand with a proper identity. The advantage of an alliance would reside in de capacity to produce 5 million vehicles by 2021 – which is 16% more than the current output of both OEMs together.

Job preservation

For the French government, which owns 13.7% of PSA, the focus has to be on preserving domestic jobs. Angela Merkel stated her government would support both companies in finalising a deal, after PSA had promised to respect the current agreements – i.e. not lay off staff next year and keep all three German factories open until at least 2020.

According to a PSA press release, Tavares also had a ‘constructive telephone call’ with Theresa May. Opel’s sister brand Vauxhall has two factories in the UK – which in view of a likely Brexit would actually mean an asset for PSA. Being able to produce vehicles both in the UK and on the Continent could mean PSA can avoid trade tax.

Some hurdles nonetheless

A few tough questions remain to be solved. Who will pay for the Opel pensions, representing a hefty 7 billion euros? What about Opel’s captive finance company GMAC? PSA already has its own captive bank, Banque PSA Finance.

Also, Opel has a considerable payroll handicap. The German OEM’s wages take up 15% of turnover, compared to 10% for PSA. If Tavares wants to avoid lay-offs and closing down sites, he has to find a way to increase productivity.