PSA chief seeks talks with Merkel over Opel | Business| Economy and finance news from a German perspective | DW | 15.02.2017
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PSA chief seeks talks with Merkel over Opel

The Chief Executive of French car group PSA, Carlos Tavares, seeks talks with German Chancellor Angela Merkel and the country's powerful labor unions to secure the takeover of carmaker Opel from General Motors.

French PSA group confirmed newspaper reports on Wednesday that its chief executive Carlos Tavares wanted to discuss a possible takeover of Opel with Chancellor Angela Merkel and the IG Metal metalworkers' union.

The aim of the talks was to reach an "opening and an alliance" with German political and labor union leaders for the buyout, a PSA spokesperson said.

Both PSA and Opel parent General Motors (GM) confirmed on Tuesday that they were in talks on "numerous strategic initiatives," including the possible sale of Opel to PSA, with GM adding that "there can be no assurance that an agreement will be reached."

The move caught German politics completely unawares, raising concerns about 38,000 Opel jobs in Germany. Economics Minister Brigitte Zypries said it was "unacceptable" that GM and PSA had not informed the Opel works council, the union IG Metall and the regional and federal government of their plans.

Also on Wednesday, GM Chief Executive Mary Barra planned to visit Opel's headquarters in Rüsselsheim near Frankfurt in a bid to explain General Motors' policy on the planned sale of its European division to PSA, Reuters reported.

In a letter to employees seen by Reuters, she said combining GM's Opel and Vauxhall business with Peugeot would be beneficial for both companies.

"While there can be no assurance of any agreement, any possible transaction would enable the two sides to leverage their complementary strengths, enhancing their competitive positions for the future in a rapidly changing European market," Barra said.

Job cuts riddle

PSA is considering the takeover to boost its scale, get access to Opel's engineering and electric-car technology as well as reap savings from joint purchasing and eventually cost cuts.

Christian Stadler, professor of strategic management at Warwick Business School, said a takeover wouldn't mean the end of the Opel brand even though he expects job losses in both Germany and England, where Opel's Vauxhall subsidiary is based.

"My inclination is to see them in the UK because Brexit makes it a less attractive market. Germany, on the other hand, is Opel's biggest market so there is more room for cost-cutting," he told DW-TV.

Elusive Opel profit

For Detroit-based GM, shedding Opel would mark a clean exit from Europe, especially after the US carmaker reported losses year after year in Europe. Opel last made a full-year profit in 1999 on a pre-tax basis.

In 2016, Opel lost $257 million (239 million euros), forcing GM Chief Executive Mary Barra to re-think her commitment to the German carmaker, made several times in recent years.

"We aren't satisfied with these results and the team is focused on mitigating the effect through further cost efficiencies," Barra said after the earnings update.

GM is reportedly seeking a multi-billion dollar amount for Opel. Analysts at Macquarie estimated that Opel has an enterprise value of about 2.6 billion euros.

Combining PSA Group with Opel and its British brand Vauxhall would create the second-largest carmaker by market share in Europe, with 16.6 percent of sales according to 2016 figures. The combination would be second only to Volkswagen, with 23.9 percent, and would vault ahead of the Renault-Nissan alliance, which had 13.9 percent.

uhe/jd (AFP, Reuters, dpa)