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jasonj80

GM to Exit EU - Sale of Opel to PSA

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The US would never allow a GM/FCA merger. To much market share in Key segments and way to many job losses. It would take all of North America into a deep recession.

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None of this makes even one tiny bit of sense. A company that is overly Euro-dependent with high labor costs, two mass market brands and a weak upmarket presence would become more dependent on Europe, have a third mass market brand(Opel and Vauxhall are essentially one brand), and even higher labor costs.

GM in the US would add two weak car brands needing substantial investment, two truck brands that replicate the two that they already have, minus the Wrangler...and they already have a Wrangler fighter under development(rumored). And they would trade Opel/Vauxhall, which have at least a semi-decent reputation, for Fiat...

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When's the last time GM has done anything that made sense?

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So a couple of things to put it all in perspective

 

1. Europe is increasingly isolated in term of automotive market trends. Like JDM, the core European market tastes and demands are different than the rest of the world - premium A-cars and wagons do not sell anywhere besides the dozen or so western European countries.

 

2. GM has redundant engineering centers in Detroit, China, Korea, Brazil, and Australia to pick up the slack if Germany is not part of the picture.

 

3. Of the key models in the line up using global platform, GM already sells more Buicks than Opel: Encore > Mokka, Verano > Astra, Regal > Insignia

 

4. Opel is already working very closely with PSA on new models that are being counted to deliver better profit margins, namely the CUVs: Crossland X = rebadged Peugeot 2008, Grandland X = rebadged Peugeot 3008

 

What does all mean? GM can afford to cut loose Opel and it probably won't have a big impact on any economy of scale issue. Europe is a no growth zone for GM so investing in the market, which requires unique regional specific models is less attractive than investing in growing markets that have common needs/that are trending the same direction. GM's play is really interesting here because it signals a fundamental shift in thinking... it is EXACTLY like Ford's exit from Japan but obviously at a much bigger scale.

 

PSA's play is different. They want to build up Europe into a fortress because they are a regional car company. They are not using this as a way to enter US market. Since Europe is on a flat or downward trajectory, you want to be no worse than #3 there. Merging PSA and Opel will accomplish this goal. It's the same idea as Nissan grabbing Mitsubishi and Toyota putting Mazda and Subaru on the short leash to fortify JDM.

 

Right now, I don't think the deal will go thru because there is too much to unwind. For example, PSA will not want to continue Opel's commercial vehicle partnership with Renault. And it's an open question whether PSA has the ability to pull off the deal. The French Govt is onboard but Dongfeng holds the purse string. What does Dongfeng get out of this deal? Nothing right now. In fact, allowing PSA to be more powerful/entrenched in Europe is a risky bet for Dongfeng. It means it is less likely to share advanced tech and platforms in China.

 

If the deal does go thru, I see GM re-introducing Chevy to Europe in the short term. I don't see GM buying FCA. Anyone smart enough can see that time is FCA's biggest enemy. If you want any FCA assets, you don't want to make a bad deal with Sergio. You wait until the banks are in charge and they will swiftly make sensible deals. Buick will be just fine... the most profitable models are not shared with Opel anyway, and the shared models all have existing Chevy twins.

Edited by bzcat

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I am left wondering if a Chinese "Knight in shining armor" will ride in a buy up Opel from under PSA....Geeley comes to mind.Opel and Volvo in a European juggernaut to win the hearts and minds of the Euro car buying public.

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got it. I must have missed something

 

tbone said he would love it if Ford bought Jeep.

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When's the last time GM has done anything that made sense?

 

Canyorado? Although at the time we all thought they were crazy.

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When's the last time GM has done anything that made sense?

Anytime they copy Ford...

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I am left wondering if a Chinese "Knight in shining armor" will ride in a buy up Opel from under PSA....Geeley comes to mind.Opel and Volvo in a European juggernaut to win the hearts and minds of the Euro car buying public.

Under that rationale, Tata could also benefit.

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Canyorado? Although at the time we all thought they were crazy.

 

Well, can we apply the old adage that a broken clock is right twice a day here?

 

---

 

For every Canyorado, theres the SSR, Aztek, Solstice, Sky, etc.

Edited by rmc523

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Well, can we apply the old adage that a broken clock is right twice a day here?

 

---

 

For every Canyorado, theres the SSR, Aztek, Solstice, Sky, etc.

 

Yep

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Under that rationale, Tata could also benefit.

 

If GM is soliciting offers for Opel, Tata would jump all over it. They need to volume to sustain losses in JLR.

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I get that GM has lost 20 billion dollars on Opel since the late 1990's. But why they would walk away from a 14 million vehicle market baffles me.

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I get that GM has lost 20 billion dollars on Opel since the late 1990's. But why they would walk away from a 14 million vehicle market baffles me.

 

I refer you to my post #28 above...

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I get that GM has lost 20 billion dollars on Opel since the late 1990's. But why they would walk away from a 14 million vehicle market baffles me.

When you look at their sales though it isn't pretty, 40% of their sales in Germany are to dealers, who then discount more and sell the car. It is a smart move on GM's part, they should have sold them when they had the chance 8 years ago. Just because the market is big doesn't mean you can compete in it. Look at Nissan in the full size NA truck market, millions of units sold each year but have been in the market for 15 years and still can't move any meaning full volume.

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I get that GM has lost 20 billion dollars on Opel since the late 1990's. But why they would walk away from a 14 million vehicle market baffles me.

 

Maybe it's not really profitable and someone in GM finally realized that revenue without profit isn't worth the investment.

 

 

 

 

 

Ha ha ha......just kidding.

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When you look at their sales though it isn't pretty, 40% of their sales in Germany are to dealers, who then discount more and sell the car. It is a smart move on GM's part, they should have sold them when they had the chance 8 years ago. Just because the market is big doesn't mean you can compete in it. Look at Nissan in the full size NA truck market, millions of units sold each year but have been in the market for 15 years and still can't move any meaning full volume.

 

It still baffles me why they can’t compete in a market that is about the same size of the U.S. market. I’m hardly a GM fan, but I do know a few engineers and their desire to make great vehicles is the same as any Ford engineer I know.

 

GM does well in the U.S. market and in China, and yet they can’t figure out Europe. Strange, considering that they’ve been there for over 80 years.

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I can see GM having an interest in buying FCA in that they probably want to reclaim "old" GM pre-bankruptcy brands as follows;

 

Dodge is the new Pontiac

Chrysler is Oldsmobile

Jeep is Hummer

Fiat is Saturn

Alfa Romeo is SAAB

 

GM is whole again!

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Well, this is pretty crazy.

 

Been busy with real-world stuff the last couple days and just found out about this.

 

This feels like an 'other shoe' announcement.

 

Buying into FCA would be utterly insane, but I can't see GM stepping back from being a global company.

 

I believe that GM's execs could easily talk themselves into buying FCA. Speaking strictly of book value, GM could easily absorb FCA's net debt in their cash surplus and if they legitimately believe that customers will be buying three shifts worth of full size SUVs for the next several years, they could talk themselves into that cash flow + Opel $$ restoring their debt/cash ratio.

 

FCA's sketchy balance sheet could do two things:

 

- convince smart people to stay far, far away

 

- convince foolish people that they're a bargain, because their book value is so low.

Edited by RichardJensen

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If GM is really serious about buying FCA, is there even a need to sell Opel?

 

Under no scenarios, would I ditch Opel and end up with Fiat in Europe. That's like trading Chevy for Mazda in the US (no offense to Mazda). Not just from the brand equity perspective but also the production assets. Opel plants in Spain, Germany, and Poland are probably much better run and more efficient than Fiat plants in Italy.

 

If the real reason for selling Opel is preemptive balance sheet engineering to acquire FCA, then they are doing it wrong. They should be talking to PSA on a joint bid for FCA and carve it up - GM gets Jeep and perhaps Alfa/Maserati, PSA gets Chrysler, Fiat and Fiat Professional, Dodge goes to the garbage pile, and someone else can come in the bid for Ram to avoid antitrust concerns in the US.

 

Here are all the note worthy assets in FCA:

 

Chrysler

Dodge

Ram

Jeep

Fiat

Fiat Professional

Lancia :hysterical:

Alfa Romeo :spend:

Maserati

Production sites in NAFTA zone (8 assembly plants plus other parts plants)

Production sites in Brazil (2 assembly plants)

Production site in Argentina (1 assembly plant)

Production sites in Italy (6 under performing assembly plants plus assorted parts operations)

Production site in Poland (Fiat 500)

67% of Yugo factory (Serbia)

33% of Fiat Tofas (Turkey)

50% of GAIC Fiat/Jeep (China)

Edited by bzcat

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If GM is really serious about buying FCA, is there even a need to sell Opel?

 

Under no scenarios, would I ditch Opel and end up with Fiat in Europe. That's like trading Chevy for Mazda in the US (no offense to Mazda).

 

If the real reason for selling Opel is preemptive balance sheet engineering to acquire FCA, then they are doing it wrong. They should be talking to PSA on a joint bid for FCA and carve it up - GM gets Jeep and perhaps Alfa/Maserati, PSA gets Chrysler, Fiat and Fiat Professional, Dodge goes to the garbage pile, and someone else can come in the bid for Ram to avoid antitrust concerns in the US.

 

I'm not looking at this as what you would do, or what I would do, because we would've managed the whole situation differently.

 

If this is what's being contemplated, I believe it's being pitched at the Ren Center as 'trading Opel for Jeep.'

 

Again, if this is what's being contemplated, you would sell Opel for two, maybe three reasons: 1) Balance sheet engineering (as you suggest), 2) because GM doesn't want to be responsible for *two* albatrosses in Europe (Fiat & Opel), and possibly 3) because there would likely be anti-trust concerns with a company the size of GM (globally) obtaining a commanding presence in the EU.

 

Under this scenario, GM expects zero anti-trust concerns in the US vis a vis full size trucks (and it's tough to argue with that conclusion in this environment).

 

As far as brand redundancy goes, given the fact that these are the same execs that argued in favor of keeping Pontiac during the bankruptcy, I don't think they are especially concerned.

 

I'm not saying that any of this makes sense, but if it's being sold as "Opel for Jeep" to a bunch of execs who want dumbed down narratives, then who knows??

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And, as awful as Fiat is in Europe, they're at least slightly healthier than Opel.





Which really says a lot about how messy Opel is.

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If GM or anyone else really wants FCA, or more likely a part of FCA (Jeep), I think they would wait for the bankruptcy that is coming. No sense trying to make a deal now. Why do you think FCA still hasn't found a 'partner'?

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If GM or anyone else really wants FCA, or more likely a part of FCA (Jeep), I think they would wait for the bankruptcy that is coming. No sense trying to make a deal now. Why do you think FCA still hasn't found a 'partner'?

 

I think GM smells an opportunity to secure Jeep without the risk associated with a bankruptcy bidding war or unexpected government bailout.

 

Again, this is all based on my assumption that we're looking at an "Opel for Jeep" play by GM.

Edited by RichardJensen

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If GM is really serious about buying FCA, is there even a need to sell Opel?

 

Under no scenarios, would I ditch Opel and end up with Fiat in Europe ... Opel plants in Spain, Germany, and Poland are probably much better run and more efficient than Fiat plants in Italy.

 

If the real reason for selling Opel is preemptive balance sheet engineering to acquire FCA, then they are doing it wrong. They should be talking to PSA on a joint bid for FCA and carve it up - GM gets Jeep and perhaps Alfa/Maserati, PSA gets Chrysler, Fiat and Fiat Professional, Dodge goes to the garbage pile, and someone else can come in the bid for Ram to avoid antitrust concerns in the US...

hmm...

could the Opel sale be a smoke screen to cover them taking Fiat

stripping out Jeep (& anything else they want)

and selling (flipping) the rest to Peugeot? ...while keeping Opel?? (maybe minus any parts they don't want)

Edited by 2b2

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