NICK GIBBS

PSA got a bargain with Opel, former GM Europe boss says

Nick Gibbs is a UK correspondent for Automotive News Europe.Nick Gibbs is a UK correspondent for Automotive News Europe.
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PSA Group got a "good deal" when it bought Opel/Vauxhall, says Nick Reilly, who was GM's troubleshooter before he retired in 2011.

PSA CEO Carlos Tavares is demanding the return of half of the 1.3 billion euros it paid General Motors for GM's Opel business, Reuters reported last month. However Reilly, Opel's former chairman and a 36-year GM veteran, believes Opel was worth more than 1.3 billion euros that PSA paid to GM.

"GM needed to get out, so they paid PSA quite a lot of money to get out," he said, in reference to GM's payment to PSA of 3 billion euros to settle pension obligations.

PSA will find it difficult in the next five to 10 years to increase Opel's vehicles sales and also to overcome the similarities between the Opel, Peugeot and Citroen brands.

He believes PSA will have to close Opel factories to restore Opel to profitability. "I'm sure they will close plants. I'm sure they will reduce investment in new product programs," he said at a recent industry dinner hosted by UK's auto manufacturer association, the SMMT.

Reilly helped to stabilize Opel.

PSA has a tough task ahead because PSA and Opel are "two companies struggling a bit, they're right on top of each other in the market, middle of the road, neither premium nor entry, so the risk is they cannibalize themselves."

British-born Reilly, 68, was appointed head of GM Europe in 2009 to help stabilize Opel after it was thrown into chaos when GM decided to sell the German automaker to Magna International, then dropped the plan at the 11th hour.

You can reach Nick Gibbs at ngibbs@crain.com.

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