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February 16, 2017 12:00 AM

PSA intends to keep Opel as a German brand, reports say

Wire reports
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    Tavares would head a combined PSA and Opel but keep Opel's current management structure, reports said.

    PSA Group CEO Carlos Tavares intends to keep Opel as a German company if the French automaker acquires the money-losing brand from General Motors, reports said.

    Tavares also is open to maintaining Opel's current management structure if the deal goes ahead, the reports said, citing people familiar with Tavares's thinking.

    PSA and GM on Wednesday embarked on a charm offensive to win German support for a sale of Opel to PSA amid concerns that a combination would lead to job losses and a massive overhaul of the brand.

    Tavares will meet German Chancellor Angela Merkel in the near future. He also wants to meet Opel's German stakeholders, a PSA spokesman said, adding no date has been fixed.

    Tavares will pledge to "maintain Opel as a German company in full compliance with German labor law" when he meets government and union officials, a source told Reuters. He will present the deal as "an alliance between a French carmaker and a German carmaker."

    GM is making the case that selling Opel to PSA would position the brand to grow and provide better long-term job security than the status quo, Bloomberg reported. Both GM and PSA are saying in private discussions that Opel would face sharper cuts under continued GM ownership than under PSA's, sources said.

    GM CEO Mary Barra and President Dan Ammann plan to meet with German government officials soon. Barra visited Opel headquarters in Ruesselsheim near Frankfurt on Wednesday. She did not meet workers but sent a memo to staff saying the deal would be good for GM's future growth plans, shareholder value and for the longevity of Opel's German operations.

    The tie-up would put Opel and PSA "in a position to improve their standing in the fast-changing European market," Barra wrote in a memo, which was signed by Barra and Opel CEO Karl-Thomas Neumann.

    GM and PSA hope to finalize a deal before the Geneva auto show in just over two weeks, the Financial Times reported.

    Germany's politicians unions have criticized the tie-up plan, confirmed by GM and PSA on Tuesday. As many as 15,000 jobs in Ruesselsheim are at risk, while there are fears for the future of GM's two vehicle plants in the UK where Opels are sold as Vauxhalls.

    Softer stance

    Berlin somewhat tempered its stance on Wednesday. The government has a "strong interest in a successful future" for Opel and will engage constructively with the discussions, a government spokesman said.

    PSA and GM have declined to say what cuts they would make to jobs, plants, production capacity or research and development under the deal being discussed. Of GM Europe's roughly 38,000 staff, about 19,000 are in Germany and 4,500 in Britain.

    The deal proposal emerged last year from regular talks between GM and PSA, according to two people with knowledge of the matter. The carmakers share three vehicle programs as a legacy of their last attempt to forge a deeper alliance. That earlier effort foundered before PSA's 2013-14 near-bankruptcy and bailout, in which the French state and China's Dongfeng took 14 percent stakes to match the Peugeot family's diluted holding. GM sold a 7 percent PSA stake ahead of the rescue.

    But the joint development and production of SUVs and commercial vans at three different PSA and Opel plants has prepared engineering teams to do more, according to one of the sources with knowledge of the plan. "They're already working together," he said. "They would hit the ground running."

    GM's European business, which appeared on track to break even after decades of declines, lost $257 million last year, which was an improvement on a $813 million loss in 2015. GM Chief Financial Officer Chuck Stevens said on Feb. 7 he expects the automaker's performance in Europe this year to be about even with its 2016 loss. He said GM is hopeful its European business could finally break even in 2018.

    Reuters and Bloomberg contributed to this report

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