GM axes deal with Peugeot Citroen: how it helps Vauxhall

Wolfgang Rattay, Newscom, RTR

Strange as it sounds, the sale of GM’s 7% share it only just bought in Peugeot is good news for Vauxhall buyers. The reason is that it is the last stage of GM’s plan to improve the plight of Opel and Vauxhall by getting rid of all the distractions and focusing on improving the cars and the marketing.

The Peugeot move has to be seen in the context of GM pulling Chevrolet out of Europe only a few weeks ago. Executives at Opel had publicly wondered why GM was selling a Chevrolet Traxx as well as the near-identical Opel/Vauxhall Mokka - the concern was that Chevrolet was doing as much damage to its sister brands as it was to the competition. By getting rid of Chevrolet in Europe and selling its shares in Peugeot, GM is sending the strongest possible signal that its future in Europe lies 100% with Opel and Vauxhall.

GM is sending the strongest signal that its future in Europe lies 100% with Opel and Vauxhall

That will come as a welcome boost to both Vauxhall workers and dealers, after years of uncertainty. GM publicly tried to sell Opel and Vauxhall when it went bust in 2009. At the time, Fiat was a bidder but the German government vetoed Fiat’s plan to close German car factories (to Germans, car factory closures are what happen in other countries).

The German government wanted GM to sell to a Magna Steyr, an Austro-Canadian car components supplier which had Russian backing – although why they were keen on a deal with a Russian backed organisation that had no experience of running a car company, is anyone’s guess.  Eventually GM decided it had to keep its European operation and has been stumping up cash to cover the losses ever since.

The 2012 agreement with Peugeot (the senior company within PSA Peugeot Citroen), suggested that the two companies might eventually merge their European car-making operations. As plenty of people observed at the time, it looked a bit like two drunk men leaning against each other for support. Yes, it could cut costs, but making unwanted cars more cheaply did not seem to be much of a strategy.

Perhaps we can read that in the body language of General Motors chairman and CEO Dan Akerson (below left), as he inked the deal with PSA chairman Philippe Varin (below right) in February 2012.

AP

It now seems that GM has come to the same conclusion. It accepts that there are no short-cuts to success in Europe with new brands like Chevrolet, or joint ownership with competitors. Success is going to depend on the old-fashioned technique of making better cars in the right quantities, so they can be sold at decent prices and not discounted like crazy. GM will continue to do ad-hoc deals with PSA – there will be jointly-developed small MPVs and medium-sized soft-roaders – but the original idea of sharing platforms across the board has been dropped.

Meanwhile PSA is expected to announce a sale of around 10% of its shares to a Chinese company, Dongfeng. That deal is a lot easier to understand - Chinese cash for European expertise. There is also talk that the French government, which owns 15% of Renault, may chip in with a shareholding - ironically just after the US government sold its last shares in “Government Motors”, as GM became known. What is French for “Government Car Industry”, we wonder?

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GM pulls Chevrolet out of Europe

By Jay Nagley, contributor, MSN Cars