Opel has unveiled a comprehensive plan aimed at making a positive contribution to Groupe PSA's bottom line by 2020, as well as outlining its electric vehicle strategy.
IHS Markit Perspective
- Significance: Opel has announced that all its future models will be based on PSA platforms as part of a new strategic corporate plan that aims to make best use of the shared resources of its new parent company, Groupe PSA.
- Implications: The end goal of the plan is to see Opel become profitable by 2020, an ambitious target given that the company's former owners failed to achieve that goal for the best part of two decades. However, with the shared use of PSA's platform and engine hardware, it will have better tools than ever before to achieve this target.
- Outlook: The plan looks to dampen speculation over the shared production footprint that both PSA and Opel have at their disposal, although it will be interesting to see how it will go about reducing labour costs along the lines it details in the release.
Opel has announced a new strategic corporate plan aimed at maximising the synergies and benefits from co-operation with its new parent company, Groupe PSA. According to a company press release, the new plan will go under the PACE! banner and will be focused on the principal rationale behind PSA's acquisition of General Motors' (GM) European business, namely to make it into a net positive financial contributor to the overall business. In terms of the principal financial targets, Opel is looking to return to profitability by 2020, with a 2% automotive recurring operating margin and positive operational free cash flow. This margin target will eventually be extended to 6% by 2026 as the synergies and economies of scale from the co-operation between Opel and PSA become mature and further embedded in the cost structures of both companies; annual synergies of EUR1.1 billion (USD1.3 billion) are targeted by 2020, rising to EUR1.6 billion by 2026. There will be an initiative to reduce costs per car by EUR700 by 2020, with the end goal being to bring Opel towards the industry benchmark in terms of labour costs/revenue ratio, while marketing costs will be reduced by 10%. Further optimisation of research and development and capital expenditure at 7–8% of automotive revenue, increased manufacturing and administration efficiencies and processes by 2020, and the release of working capital of EUR1.2 billion by 2022 will also contribute to enhanced synergies.
The main focus of these synergies will be on a faster-than-expected switch to new Opel/Vauxhall vehicles being built solely on PSA architectures, with the plan stating that from 2024 all Opel/Vauxhall passenger car offerings will be based on PSA platforms. Opel passenger cars based on the PSA CMP and EMP2 platforms will be built at existing Opel/Vauxhall plants, which will lead to what Opel describes as "new vehicle allocations that will provide a better utilisation rate for the next decade". This will start with a new EMP2-based sport utility vehicle (SUV) being built at Eisenach (Germany) in 2019, and an EMP2-based D-segment vehicle that will be built at Rüsselsheim (Germany). At the same time, existing Opel and Vauxhall powertrain production will be carried over from existing GM powertrains to PSA engines and transmissions. Opel added that the plan is dedicated to maintaining the entire current PSA/Opel production footprint in Europe "with the clear intention to maintain all plants and refrain from forced redundancies in Europe". There will, however, be reduced labour costs where necessary through the means of innovative working-time concepts, voluntary programmes, or early retirement schemes.
Commenting on the strategy, Opel CEO Michael Lohscheller said, "PACE! will unleash our full potential. This plan is paramount for the company, to protect our employees against headwinds and turn Opel/Vauxhall into a sustainable, profitable, electrified, and global company. Our future will be secured and we will contribute with German excellence to the Groupe PSA development. The implementation has already started with all teams eager to achieve the objectives." There will also be an accelerated push towards electromobility, with all Opel/Vauxhall passenger cars set to have a pure battery electric vehicle (BEV) or plug-in hybrid electric vehicle (PHEV) version as part of the model range by 2024, while Opel/Vauxhall will have four electrified car lines on the market, including the Grandland X PHEV and the next-generation Corsa as a full electric vehicle (EV).
Outlook and implications
On the surface, PACE! appears a sound plan in terms of exploiting the potential synergies between PSA and Opel, and the more rapid transition from Opel to PSA platforms and powertrains for Opel/Vauxhall-brand cars will no doubt help to accelerate considerable industrial savings and synergies that can be unlocked by this alliance. However, perhaps Opel's biggest strategic disadvantage is that it is a mid-market brand, which like other mid-market brands has battled to maintain pricing and mix in a hugely competitive Western European market, while it has a significant chunk of its production in one of the most expensive countries in the world in terms of labour costs: Germany. The company says it will not impose compulsory redundancies and that it will instead use mechanisms such as "innovative working time concepts, voluntary programs or early retirement schemes" to lower its fixed labour costs in Germany. It will be interesting to see how aggressive it is in doing so and whether it encounters any resistance from the powerful German works councils and unions. The plan to maintain all plants and avoid compulsory redundancies is despite the fact the deal for PSA to acquire Opel saw the former add six further production sites to its existing roster of eight wholly owned facilities and two joint-venture factories. The current labour contracts last until 2020, which is when Opel aims to hit profitability.
In terms of near-term model plans involving German production, Opel had previously announced that the successor to the current Mokka X would be built at Eisenach from 2019, while Rüsselsheim would gain an as-yet unnamed "large SUV" by 2020. It noted that the sites would also export. The migration to a complete PSA platform structure is set to occur earlier than had been anticipated, with IHS Markit having forecast that the Mokka would be built on GM's VSS-F B/C platform until 2025, with total GM platform production being phased out by 2027, so that pledge is significant. Meanwhile, it is also important, albeit guaranteed in Opel's existing labour agreement until 2020, that all-new Opel/Vauxhall vehicles will be engineered in Rüsselsheim, which will be transformed into a global competence centre for the whole Groupe PSA. This should partly guarantee to a degree the design and engineering autonomy of Opel and should help the differentiation process between PSA vehicles and Opel/Vauxhall models that will share powertrains and platforms.
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