The strategy of General Motors and the sale of Opel to PSA almost bare

General Motors

For many years General Motors has been the first manufacturer of cars in the world. This situation has provided you with a power high in the sector, however, nothing is eternal, and this position he lost when the last great financial crisis broke out. The big restructuring that had to do the conglomerate american emphasized that not because of more units sold generate more money and therefore had to make great efforts to reduce their costs.

As we all know, Opel has spent years losing money in Europe. During these past few years General Motors has left nothing more and nothing less than some 15 thousand million euros, and even so, during the last quarter of last year came back to lose another 250 million euros. On the basis of the market, now things seem to do well, but the signature of the ray is not able to reach its critical mass in our continent and this is why General Motors would have tired of giving them the help and more when you only see red numbers.

General Motors

As stated by Mary Bar, CEO of General Motors, to multi-media american the sale of Opel (and Vauxhall) to the French group PSA should not only be to their have still not shed positive data. In addition to this situation (too dangerous for the French consortium), there is another reason and that is a change in the business strategy of General Motors to another parcel of the business.

The idea pursued in General Motors passes by to redirect their investments towards high-performance products economic and as it is obvious Opel is not one of the firms most profitable in the group. To do this they have to increase their bet by firms premium of the group (Cadillac and Buick) in order to maximize the investments that will be made to them to improve their products.

Cadillac edición limitada White Edition

In this way, we have that General Motors would be a manufacturer focused “almost” (highlighted in quotation marks) gross volume sales to focus on the economic margin that provides each and every sale. As it is obvious many will not know what this means, and that is what we are going to explain in simple, understandable and very very simplified (in this explanation we will use figures are fictitious to illustrate what we are explaining).

If General Motors earns from the sale of an Opel Astra Sedan 100 euros and by the sale of a Buick Verano 300 euros to the firm is more profitable to sell an Buick that three Opel. This is somewhat reasonable, since the Opel is not a model aspirational and the Buick belongs to a firm semi premium and now that the market demands are products of cutting premium. In addition, not only would earn 200 euros more for each car sold, but if you remove Opel from its structural expenditure, we would have that the Buick Verano would increase their profitability by several percentage points.

Buick Velite

in Addition, also there are other reasons that General Motors wants to eliminate Opel from its structure. The development and manufacture of small cars and medium (core business of Opel is becoming less and less profitable and, therefore, selling these cars in foreign markets becomes increasingly difficult. In addition, and although the group lost its hegemony in Europe, there are other markets as the Chinese will report more benefits, and their potential for growth they provide to the american greatest opportunities continue to grow in Europe.

therefore, and summarizing. If General Motors emerges from Opel would fall apart directly of its debts, and its structural costs. As the technology used to manufacture its models remains the same, would save considerable money by taking off of over the signature of the beam and in addition it would also make some cash by their sale. But in addition, if after its sale to the PSA Group continued to maintain a part of capital’s shareholders will still get some revenues from the sale of the Opel when they are integrated under the French group.

Grupo PSA Logotipo

what would be a PSA? The French conglomerate needs to increase its critical mass in the european market and adding Opel to its operations could reduce the cost in the development of future models. At this time their acquisition of General Motors is a better idea that good since Opel has a range renewed and for some years would not have to make high investments to keep it afloat.

in Addition, PSA is not only not spend the money for a few years to launch or refresh models of Opel, if not that will be able to take advantage of the know-how that the German firm has in certain subjects. The most important is the one related to the electric vehicles since the French still walk a little lame in this terrain.

The problem would be if Opel is not able to meet the expectations of the PSA Group and if this happens, it could happen two things. The first would be that the cuts would be difficult and would affect thousands of jobs both in Germany and half of Europe. The second consequence is that PES decides what firm to sacrifice and touch the lose to some of those which already exist (Citroën and Vauxhall).

Gentlemen, support stakes.

Source – Automotive News