Analysts See Combined PSA-Opel As Shuttering 3 Plants And Laying Off 5,000 Workers

Analysts have chimed in on what cost-cutting measures and targets could be in store for the combined PSA-Opel group, providing some noteworthy insight into the automaker’s plans.

The first order of business will be to eliminate the currently-humongous overlap between PSA and Opel, with two biggest overlaps being vehicle technology and manufacturing.

On the technology side, re-engineering core Opel vehicles to use PSA architectures, powertrain components as well as other parts will lead to greater scale economies in terms of raw materials and supplier parts procurement. Having redeveloped the Opel vehicle lineup using its own tech, PSA can begin to eliminate manufacturing redundancies by shuttering manufacturing plants and increasing plant utilization.

“Given the massive overlap of the two businesses, there should be no illusion as to what will need to happen,” wrote Evercore ISI analyst Arndt Ellinghorst in a recent note.

PSA chief Carlos Tavares has promised to honor existing GM plant and job guarantees. Many of those, expire in the 2019-2021 timeframe, just around the time that PSA-developed Opels would begin to arrive. But the company has been very clear that it will not give new plant or job commitments at this time. “We’d discuss those at a later stage,” a spokesman was quoted as saying.

In the combined PSA-Opel body, Evercore expects three plants to close by 2021.

“It’s about hard restructuring in Germany, the UK and Spain resulting in at least 5,000 manufacturing job cuts,” says Ellinghorst.

Citing sources close to the talks between GM and PSA, some publications have pegged PSA to be looking at the Opel acquisition as delivering cost synergies of between €1.5 billion and €2 billion ($1.6-2.1 billion USD) annually, while boosting combined vehicle deliveries to over 5 million units annually.

“When you look at the product plan you see that you can, in a quite speedy way, implement significant synergies,” Tavares said.

It has been reported that PSA Group has reached a deal to purchase General Motors’ loss-making Opel division. An official announcement on the deal is expected shortly.