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PSA Sales Power Ahead As Investors Await Opel Plan

PSA Sales Power Ahead As Investors Await Opel Plan.

Up To 6,000 Job Losses Expected.

“In the first half of 2017, PSA generated a profit of €913 per vehicle, while Opel-Vauxhall lost €686 per vehicle in the first quarter of 2017”

PSA Group raised its automotive sales by 12 per cent in the third quarter to €8.4 billion and investors say this bodes well for second half profit, but they are braced for flak when it shortly announces its strategic plan for Opel-Vauxhall – bound to include plant closures and job losses.

PSA recently completed its purchase of Opel-Vauxhall from General Motors Europe.

French companies only report sales in quarterly reports. Earnings news come half yearly.

Bernstein Research said based on the sales figures PSA should beat profit expectations in the second half.

“Although we stress that Opel (and Vauxhall) and its losses and cash burn – will be very important from here,” Bernstein analyst Max Warburton said.

German Manager Magazin has said PSA is planning to bring forward its profitability target for Opel to 2 per cent by 2019, from 2 per cent by 2020 and achieve annual synergies and savings worth €1 billion by 2019, instead of 2020. Experts say this could lead to job cuts at Opel-Vauxhall of between 3,000 and 6,000.

Opel-Vauxhall is also behind in the race to meet the E.U.’s 2020 CO2 targets, according to PSA.

Much scope
There is plenty of scope for improvement at Opel-Vauxhall.

According to the Center for Automotive Research (CAR) at Duisberg-Essen University, Peugeot sells 35 new cars per employee, compared with 30.4 for Opel-Vauxhall. Opel-Vauxhall would need 6,000 fewer employees if its plants were as productive as Peugeot’s French ones.

In the first half of 2017, PSA generated a profit of €913 per vehicle, while Opel-Vauxhall lost €686 per vehicle in the first quarter of 2017.

According to CAR, PSA Automotive’s operating profit in 2016 was €2.23 billion, while Opel-Vauxhall lost €232 million.

Professor Ferdinand Dudenhoeffer of CAR said Opel-Vauxhall has been using self-registrations to keep sales and market share up, and this means losses will have increased.

In the first 9 months of 2017, Opel-Vauxhall sold 684,800 vehicles – down 4.6 per cent compared with 2016 for a market share of 6.2 per cent (6.7 per cent), according to AID figures.

Dudenhoeffer said the takeover by PSA of Opel-Vauxhall only makes sense if it makes efficiencies by standardising engineering across all the new, bigger company.

Duplication rife
“There are numerous double functions across both companies. An important part of PSA’s success over the past six years has been the continuous improvement of efficiency by reducing the number of employees in the automotive sector. At the end of 2016, PSA Automotive employed 89,927. This is almost 32,952 less than in 2011,” Dudenhoeffer said.

Citi Research likes what it calls PSA’s resurgence on the back of new products, but is a bit worried about the implications of the Opel-Vauxhall takeover.

“If (Opel-Vauxhall) can be restructured and integrated easily and quickly then there may be substantial upside (for the stock price). To our minds that is far from guaranteed, especially as European volume growth slows,” Citi Research analyst Michael Tyndall said.

Citi Research says Opel-Vauxhall lost €390 million in the first half of 2017 and will lose another €470 million in the second half.

PSA’s restricting plan for Opel-Vauxhall is expected by the middle of November.   


 

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