Opel and Peugeot: Not a love match | Business| Economy and finance news from a German perspective | DW | 17.02.2017
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Opel and Peugeot: Not a love match

Employees are worried about the possible sale of carmaker Opel to French group PSA. DW reporter Christian Pricelius went to Opel's main factory in Rüsselsheim, Germany, to listen to them.

It's five in the morning in Rüsselsheim near Frankfurt. The car park at gate 16 gradually fills up. Almost everyone who arrives works on the production line. All are male. "More women work at the administration gate," one employee says.

The men wear backpacks or small provisions bags. The company has been struggling with red ink since the 1990s. And almost every year since there have been swarms of camera teams at the factory gate.

But on February 15, everything changed. General Motors plans to let its German subsidiary go. Opel and its workers are to be sold to the French manufacturer PSA, which builds Peugeot and Citroën cars.

The US giant bought up the German company - then already nearly 60 years old - in 1929. But the end of an almost 80-year-old transatlantic tradition is now drawing near.

Behind closed doors

This would be the result of years of losses that Opel has caused GM. Some 15,000 employees work at Opel's home plant in Rüsselsheim. Throughout Germany, the total is 22,000.

"We have to wait now to see what our works council chairman hears from Mary Barra," a 40-year-old employee said. Barra, the CEO of GM, is right here with management, being briefed behind closed doors. Wolfgang Schäfer-Klug, the works council head in question, is taking part in the discussions.

General Motors Mary Barra in Rüsselsheim (DANIEL ROLAND/AFP/Getty Images)

General Motors CEO Mary Barra is no stranger to Rüsselsheim

The fact that General Motors and the French carmaker PSA have made great progress in negotiating the sale of Opel under great secrecy has "surprised and irritated" many at Opel. Schäfer-Klug says he wants to take an unbiased look at PSA's offer.

"There could be something good going on. Things can only get better," says a shift worker holding an umbrella. The employees were given details at a staff meeting on Friday, but nothing was revealed to the outside.

A difficult market

Opel is making losses, but in 2016 these fell to 241 million euros - the figure had still been over 750 million euros the previous year.

"Opel's numbers have improved significantly," agrees Jürgen Pieper, car analyst at the Metzler bank in Frankfurt. Many observers attribute this to the management successes of CEO Karl-Thomas Neumann, who has been managing the company's fortunes since 2013.

"Opel probably would even be in the black today," Pieper says, if it weren't for Brexit, which turned the new management on its head. That's because Opel's UK subsidiary Vauxhall is suffering from the weakness of the British pound.

Opel has faced an environment in recent years that has been far from easy. It abandoned its business in Russia because of the difficult economic and political situation there.

GM's stubborn group policy had always excluded its stepchild Opel from the lucrative Chinese market. "Divide and rule," was the motto of the Americans, under which Opel was confined to ruling the European market.

Some experts estimate the sale value of Opel at 3 billion euros.

Unequal partners

So now an unequal wedding with the French? PSA is much bigger than Opel. In Europe and South America alone it has 53,000 employees.

While Opel sold around 1.1 million vehicles last year, PSA sold nearly 3.1 million. In 2016, the French company's sales totaled 54.7 billion euros, compared to Opel's 16.9 billion euros.

The two companies together would become the second-largest automobile manufacturer in Europe after VW. PSA already produces cars in China in its own factories.

Karl-Thomas Neumann and Mary Barra (picture-alliance/dpa/U. Zucchi)

Barra and Opel chief Karl-Thomas Neumann unveiled bolder models at the Frankfurt Motor Show

The French state has a stake of 13 percent in the company, while the Chinese joint venture with Dongfeng Motors holds another 13 percent.

The negotiations seem to have become a political issue. It is rumored that PSA CEO Carlos Tavares has sought an appointment with the German chancellor, and the participation of the French state in the negotiations has made Opel's already weak position against PSA no easier.

"Without access to the world's largest car market, namely China, it will be difficult for Opel," Pieper says. PSA, too, has suffered losses for a long time. A merger, he said, would only bring "two sick men" together, which would not be a viable business model.

Both partners also have a very similar model range, offering basic and upscale mid-range cars. Industry expert Ferdinand Dudenhöffer says "at least one-third of jobs" at Opel are potentially endangered, meaning more than 12,000 of Opel's 38,000 employees throughout Europe.

But Pieper assesses the situation somewhat more positively. One advantage, he says, is the loyalty European customers have to their national marques.

Strategy wanted

Opel produces in five other European countries besides Germany. PSA has further manufacturing sites in Slovakia, Portugal, Spain and South America as well as the joint venture with China's Donfeng Motor Group.

Possible collaborations like these and access to the Chinese market could also provide Opel with the focus it needs to survive.

Pieper sees a further opportunity in a joint German-French strategy for rationalization based on the example of Volkswagen. Among other things, the Wolfsburg-based company has long relied on unified chassis, called platforms, based on which the various VW brands build their cars.

GM and PSA have already been working together, on the initiative of GM's management. The Crossland X offroader is based on the same platform as the Peugeot 2008 and the medium-sized Grandland X has a common technical base with its French "sister model" Peugeot 3008.

The two SUV's have been a success in pushing Opel along the path to a new image: Gray understatement was yesterday, sleek shapes and sophisticated design, paired with high-tech is the new image.

That's been Thomas Neumann's hope - but now the Opel head is facing the biggest challenge of his career.

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