GM, PSA Getting Pushback on Potential Opel Deal

German, British unions and governments against the sale.

by on Feb.16, 2017

GM is re-examining its European operations, specifically, the UK, in light of the "Brexit" vote.

General Motors’ plans to sell off its money-losing Opel unit is running into political and union opposition in both Germany and Great Britain.

GM is proposing to sell Opel to the French-based PSA Group, which it is assumed will move to reduce costs, shed some of the excess capacity and move to consolidate product lines. Excess capacity has long been identified as a major problem in the European auto industry but governments and unions throughout Europe have made it extremely difficult to close plants

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Germany’s federal government and influential unions, which are already facing the threat of major job losses at Volkswagen in the wake of the diesel scandal, have moved quickly to criticize the proposed GM-PSA deal.

The government of Great Britain, which is facing the potential decimation of its indigenous auto industry once Britain leaves the European Union, is also raising concerns about an Opel-PSA merger. Vauxhall, one of Great Britain’s oldest nameplates, is part of Opel and could wind up on the chopping block in a merger.

(GM considers sale of struggling Opel to France’s PSA. Click Here for the story.)

GM officials had said last year after British voters favored leaving the European Union that Brexit made Vauxhall vulnerable and the unit’s continuing losses pushed GM’s European operations into the red last year. The continuing red ink prompted GM CEO Mary Barra to re-evaluate Opel’s role within GM.

CEO Mary Barra met with German Chancellor Angela Merkel recently and discussed the potential sale of Opel.

The recent flap in the U.S. over a border tax and trade with Mexico as the new administration of President Donald Trump took office only served to underscore how jobs in the auto industry can quickly become a political issue.

GM’s dependence on Opel engineering also has diminished because of the decline in demand for passenger cars and the need for electrified vehicles, which are developed in the U.S. and now China.

(Click Here for details about European auto sales.)

Paris-based PSA said it would dispatch CEO Carlos Tavares to meet German labor and political leaders likely to include Chancellor Angela Merkel, as his GM counterpart Mary Barra visited Opel headquarters near Frankfurt, according to Reuters. Both Merkel and British Prime Minister Theresa May are facing heavy political pressure over jobs and immigration.

Tavares, who is expected to become head the combined company if the deal goes through, “wants to meet Opel’s German stakeholders,” a PSA spokesman said, adding no date had yet been set for those talks. The French carmaker had no further comment.

PSA and GM have declined to say what cuts they would make to jobs, plants, production capacity or research and development under the deal being discussed. Of GM Europe’s roughly 38,000 staff, about 19,000 are in Germany and 4,500 in Britain.

(To see more about the impact of Brexit on GM’s UK operations, Click Here.)

The prospects for a combined PSA-Opel have so far drawn only modest enthusiasm from investors in GM.

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