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PSA Restructuring Plan May Slash Opel-Vauxhall Jobs, Factories

PSA Restructuring Plan May Slash Opel-Vauxhall Jobs, Factories.

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.

Up to 6,000 jobs could go and some factories could be closed Thursday when France’s PSA Group announces its restructuring plan for Opel-Vauxhall, which it bought from General Motors Europe earlier this year.

PSA, Europe’s second biggest selling car maker behind Volkswagen with its Peugeot, Citroen and DS brands, wouldn’t confirm or deny the announcement would take place tomorrow, but media across Europe are reporting it will happen.

PSA is also expected to announce various rationalisation measures, including cutting the number of Opel-Vauxhall models sold to concentrate on higher profit segments. All future models are likely to use PSA technology and use its engineering, engines and transmissions. Opel’s technical center in Ruesselsheim, Germany will be spared the axe and become a leader for PSA in engineering, particularly electrification, according to media reports.

The Opel-Vauxhall restructuring plan is likely to follow a similar model used by PSA CEO Carlos Tavares when he rescued the company from the brink of bankruptcy. Tavares cut back on the over-production of vehicles to stop heavy discounting and self-registrations, and restore profit margins. This over-production policy led to Opel-Vauxhall racking up almost unbelievable losses, reaching a total of almost $20 billion since 2000, with promises most years that next year would be ok.

Speculation has been mounting about PSA’s plan for Opel-Vauxhall.

German Manager Magazin has said PSA is planning to bring forward its profitability target for Opel to 2% by 2019, from 2% by 2020 and achieve annual synergies and savings worth 1 billion euros ($1.2 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, Germany, 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 euros ($1,060) per vehicle, while Opel-Vauxhall lost 686 euros ($800) per vehicle in the first quarter of 2017.

According to CAR, PSA Automotive’s operating profit in 2016 was 2.23 billion ($2.6 billion) while Opel-Vauxhall lost 232 million euros ($270).

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% compared with 2016 for a market share of 6.2% (6.7%), according to Automotive Industry Data.

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

Double functions
“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 has said it 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 in a recent report.

Citi Research says Opel-Vauxhall lost 390 million euros ($453 million) in the first half of 2017 and will lose another 470 million euros ($545 million) in the second half.

PSA has said it wants to resume selling cars to the U.S. one day, but won’t say when.


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