PSA Does What GM Couldn’t: Opel Returns To Profitability
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PSA Group CEO Carlos Tavares vowed to return the loss-producing Opel and Vauxhall brands to profitability in the near future. After nearly two decades of losses, Opel turned a profit this year.
Bloomberg reported Tuesday that Opel booked a nearly $600 million profit for the first six months of 2018. The profit comes as PSA aggressively restructures Opel’s operations and cuts 3,700 jobs from the German workforce. PSA has also worked to increase synergies between Opel, Vauxhall, Citroen and Peugeot to slash development costs for new cars. Tavares has gone as far as taking printers out of offices and axing company phones.
So far, it’s working, and the mass-market carmaker has lifted its profit margin closer to premium German car brands.
“This is simply the quickest turnaround I have seen in the auto industry in many years,” JP Morgan analyst Jose Asumendi, said.
Tavares cautioned not to celebrate too early and called the first profit an early sign of bigger things to come from Opel and Vauxhall. The automaker’s initial plans called for Opel to return to profitability by 2020 with a 2 percent operating margin, which has been achieved this year—all before platform and powertrain synergies create another $1 million-plus in savings. The Corsa will be the first Opel to be fully developed under the French automaker, and Tavares said costs have dropped between 20 and 50 percent during the development phase.
Recurring operating profit for PSA jumped 48 percent during the first half of 2018 to $3.5 billion.
The PSA CEO said work will continue to make Opel leaner and more profitable in the years to come, something General Motors never achieved. And one day, a PSA brand will make its way to North America—perhaps Opel.
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Instead of selling Opel to PSA perhaps GM should have hired PSA’s CEO.
Turn around process started well before PSA acquired Opel. Let’s not be so quick to give all credit to PSA.
KTN and all his lack-luster predecessors may have turned around in their swivel chairs but that’s about all they managed to turn around. I and one or two others on here predicted this would happen. It is not just the sheer stupidity of previous Opel /GM management, it is also the result of a complete change in the financial accounting of Opel / Vauxhall. GM Europe was never properly remunerated for the design and development of global platforms on behalf of the rest of GM. It is now something that is specifically listed in the PSA Group results [revenue from outside partners].
If Edmund Phillibert is correct (good to see you on here by the way!) and GM had the chance of hiring Tavares as CEO then that was definitely a golden opportunity missed. I sold all my shares in GM because of Mary Bara and until the silly cow is gone I certainly won’t be buying any more.
Tavares has successfully managed to also leverage all the synergies between all the parts of PSA to maximize cost savings and capital utilization, unfortunately for GM it is no longer a proper global automaker and the possibilities for doing the same are now gone. It is a very bad and sad reflection on GM’s current management that Tavares has done in under two years what GM promised and failed to do in two decades.
1. Remind how Tavares managed the DS brand? Answer: fail.
2.Remind how Tavares managed the electrification PSA? Answer: mediocre.
3. Remind how Tavares managed sales PSA in the China? Answer: fail.
Yara – not a good idea starting this!
1. Reminder how GM managed the Oldsmobile brand? – Fail
2. Reminder how GM managed the Pontiac brand? – Fail
3. Reminder how GM managed electrification ie EV1? – Fail
4. Reminder how GM managed Saturn brand? – Fail
5. Reminder how GM managed Hummer brand? – Fail
6. Reminder how GM managed SAAB brand? – Fail
7. Reminder how GM managed Holden brand? – Fail
8. Reminder how GM managed GM Europe? – Fail
9. Reminder how GM managed GM Korea? – Fail
10. Reminder how GM managed Chevrolet in Europe? -Fail
11. Reminder how GM managed sales & market share over the last 50 years? – Fail
12. Reminder how GM managed? It went bankrupt – Fail
GM was the greatest car maker on the planet and I for one was a huge enthusiast but todays GM is just a shadow of what it could and should be.
1, 2, 4, 5, 6. This is the result of brands redundancy.
3. Now GM has Bolt and a lot of EVs in the pipeline.What about the PSA? Almost none.
7. Holden is a profitable brand. Not fail.
8. Let me remind you that GM Europe was profitable two years ago (before Brexit).
9. GM Korea simply loses sense, as GM consolidates R&D and manufacturing operations in North America, South America and China.
10. Well, what is worse than the failure of PSA in China?
11. Remind you that the GM has a much stronger and more stable financial position (compared to 2008). I will also remind you that PSA was almost bankrupt 5 years ago and it was saved by Chinese money.
Holden is an unmitigated disaster! It has gone from No1 to just about dropping out of the top 10 in Australia – it’s a corporate corpse and is a total failure now.
The only reason the brands were redundant is that they were screwed up by GM.
GM Europe has not made a profit since 1999 and certainly did not make a profit in 2016.
Of course, GM is more stable than in 2008, it went bankrupt and was bailed out by American taxpayers.
Tavares saved PSA from bankruptcy, not China.
PSA has a mass of electric vehicles in the pipeline.
Unlike GM, PSA is not totally dependant on China so it is not major issue
Tavares saved PSA from bankruptcy, not China? True? And do you know that Dongfeng acquired a 13% stake in PSA in 2014 and financed PSA debts to support production activities?
PSA does not have much in the pipeline. Mainly, hybrids.
GM also not totally dependent on China (especially profit).
GME returned to profitability and recorded its second straight quarter of break-even or
better results (Q2 2016 – 0.1B profit).
While Holden is profitable, this is not a disaster, but temporary problems.
All multibrand carmakers have a redundancy problem. Simply, GM was the largest multi-brand company.
Yarra – Yes Dongfeng & the French government took a 13% stake each in PSA and the ex-GM share was sold to Padmapriya Automobile Investment Group, this reduced the Peugeot family holding to 14% all of which was a short-term financial fix, the long-term transformation of PSA was down to Tavares. Were it not for Tavares then I suspect they would have had to do the same thing 2-years later.
PSA has all-electric vehicles in the pipeline, not just a few hybrids, the first of these will be the 2019 Vauxhall / Opel Corsa F / Peugeot 208-2008.
Whatever happened in any given Quater during 2016 the end result was GM Europe lost $257m for 2016.
Holden is now on its 7th MD in 10 years and Holden sales are down in every sector of the market it competes in and continues a trend that started many years ago, it is not a temporary problem, its a terminal one.
GM is certainly not dependant on China for profits, you are correct on that score, but considering GM sells more cars in China than the US then I would say it is overly dependant on China and the looming trade war that President Trump is pushing for could spell disaster for GM.
In this entire conversation neither of you mentioned the lethal effect of Toxic Tony Abbot PM at the time the knife was put into GM. And all his voters who said Australia shouldn’t support its own workers even though they voted for the exact opposite. Would/wouldn’t was started by Abbott, Trump’s true hero.
Holden’s death was like Muder on the Orient Express, everybody done it!
Conservative dealers who insisted the Falcodore be an endless copy of the 1979 XD Falcon. Guilty
Customers who said they wanted big cars but then went and bought little luxury cars. Guilty
Designers who wouldn’t push for new product. Guilty
International CEO’s who wanted factories to supply streamlined single-platforms, instead of flexible factories with creative talent at the local level. Guilty
Union bosses who wanted to waste everybody’s time in negotiations instead of using groups to make innovative work practices like they do in Germany. Guilty
V8 Supercars for fomenting only one small group of customers into a rabid band-o-bogan’s and literally banning any other type of chassis. Guilty
Pretty much everyone had a hand on the knife, mate.
GM lost a shedload of money on mechanical problems on the Vectra (chains) and Astra (belts). The losses thereafter were principally due to paying off the loans to cover those disasters. Cashwise, GM Europe was running an operating profit.
Remember also, in the haste of GM to offload the business, they gave billions to PSA.
Welcome back, David1256 — You now have time again after stepping down from your interim assignment, which was doomed to fail anyway.
Observer7 – still talking out of your butt I see, I have not been involved in any assignment, interim or otherwise.
Now, after you have changed your name (pseudonym) from 1256 to Booker — I still remember that you told this forum about you having written a 23 page letter to Carlos Tavares, and gotten a sensible letter back, with more text than just an acknowledgment of receipt. I might be wrong about the 23 pages — maybe you told that it was the reply.
But, of course, I might be mistaken. But what you wrote resembled so much the interim Brexit minister with the same given name, the blind belief in the existence, even more in the viability of a self-contained English automobile industry. Gone with the wind…
Anyway, I hope your experience in the time you did not write here had been a sobering experience.
Have a nice day, and again welcome back!
I haven’t changed my name (pseudonym) it changes as to whether or not I have signed into GMA before I post a comment.
You are correct I did write an extensive letter to Carlos Tavares when PSA took over GM Europe and yes I did get a lengthy reply from his office.
Further, I have no connections to the UK government or have ever had anything to do with Brexit and nor would I ever want to.
Although I check out GM Authority every day, the only reason I haven’t posted anything recently is simply because there weren’t any articles I wanted to comment on.
My absence was not a sobering experience, it was just as it is normally, my time was spent adding information to my vauxpedia.net website.
But thank you for the welcome anyway.
Thanks for the clarification!
Again, GM is ridiculous, it’s a very bad advert for them and it shows their unability. For a moment, Tavares had put in his application for the CEO’s job: GM should have hired him, instead of Mrs Barra! It’s sad!
Tavares did not nothing but cut costs, staff and reduce the lineup. In addition, I recall that Opel was profitable for a while in 2016.
Where should we start w/regard to cost-cutting, staff and line reductions?
Janesville? Flint? Ypsilanti? Columbus, Lordstown TBD – the list is long – if Opel learned abt cost-cutting, staff and line reductions, they learned it from the mother ship.
PSA reduces Opel’s R &D centre, not just plants. This is much worse.
They think that after the Rüsselsheim ITDC has completed the running contracts for non-Opel related GM development, they will have an overcapacity.
BTW, on reducing plants — PSA is re-opening the engine plant in Tychy (Poland), which had been founded by Isuzu, then operated as joint-venture GM-Isuzu and finally part of GM Manufacturing Poland, and which stopped production in 2015 (if I remember the year correctly). It is being retooled for the new PSA 3-cylinder petrol engines for the small cars produced in Trnava, Slovakia. The original plan to build an engine factory on the Trnava site was canceled in favor of revitalizing Tychy.
Gm tried to cut cost, staff. and reduce lineup. And union’s and government wouldn’t let them
Yes, and GM financed Opel, heavily invested in R & D and factories.
If opel, there main focus is not on china then they will fail. China is a major manufacturing hub, and gm is a much profitability company with out those other brand’s or opel. Opel/PSA would not be able too make profit if they didn’t cut, staff, cost, etc. Which they should have let gm do, they PSA are not doing anything new.
When Tavares was the number 2 at Renault, he once said during an interview “my favorite company is GM and I hope to be its leader somewhere it in the future”. Renault’s boss (Carlos Ghosn) fired him over this statement. Then Tavares was approached to save PSA. Tavares had been studying Opel and GM for many years already, so this result does not come as a surprise.
Also, when talks were underway, I already mentioned here that other accounting rules could totally changed Opel’s results, and this has been confirmed by this article.
Imagine what this extra 600 M€ could have meant for GM’s Q2 results…
Did Tavares really say that about GM? I can’t remember.
Anyway, I understand that his relation with Ghosn broke because of Tavares explained that he was not satisfied with being No. 2 at Renault and that wanted to be No. 1 — at Renault, or the Renault-Nissan Alliance.