PSA may purchase Opel. This story has been bubbling for a while and it has bubbled some more, like the sinister upwellings on the surface of a lava pool.
The Guardian has reported that PSA would expect rapid savings were they to buy Opel. “Carlos Tavares, the chief executive of PSA, which owns Peugeot, Citroën and DS, said on Thursday morning that adding GM’s German Opel and British Vauxhall brands would attract new customers and generate substantial cost savings. An outline agreement is expected to be announced as soon as next week, before the Geneva motor show starts on 6 March”, wrote the formerly Mancunian paper.
This is bad news for car buyers as Opel models will be subsumed into PSA’s model structure. There is not much tangible difference between Opel’s brand character and Peugeot’s but each has different strengths by dint of being designed and made by different groups. I don’t see how PSA can keep Opel meaningfully different if they share the same technology and market position.
That market position is middle market and “sensible”. Which brand will have the higher price points? Will Opel or Peugeot be given a physical point of difference if they are sharing the same price spread? If, say, Opel is made more sporty, can Peugeot be made less so? I think not. People won’t pay more for either brand (for a long time) and PSA can’t charge less. It points towards a set of brands cannibalising sales from each other**.
I am most interested in Peugeot and Opel, rather than Citroen since the pair are most alike – Citroen has a more distinct identity. Let’s look at the price spreads of the Peugeot and Opel ranges. My data source is the Top Gear New Car Buyers [sic] Guide for Spring 2017.
Peugeot have nine basic vehicles: the 108, 208, 2008, 308, 3008, 508, Bipper and Parter. The GTi versions of the 208 and 308 don´t really have equivalents over at Opel. Opel have twelve cars if you count the GTC as being distinct from the Astra: Adam, Antara, Astra, GTC, Cascada, Corsa, Insignia, Meriva, Mokka, Viva (Karl), VXR8 and Zafira Tourer. The Crosslands will be replacing the Meriva soon.
The 108 costs £8715 and the costliest car in the Pug range is the 508 at £25,485 (which TG still says is very good but also says isn’t very good because it isn’t a BMW). Vauxhall’s price list has the Viva at its base, costing £8965, which is around £300 dearer than the 108 – nearly no difference at all. Opel’s range of twelve basic cars is topped by the Insignia, costing £17,999 (which is remarkably less than the corresponding Peugeot). They are similarly dimensioned (4792 mm for the Peugeot and 4908 mm for the Insignia) Perhaps it’s worth noting that the two cars’ maximum prices are very similar, hovering around £32,000, give or take).
What we see here is a pair of middle market companies with no especial USP operating in the same sector of the market, the squeezed middle. Leaving my personal bias for Opel aside, I think neither offers much that is special but both have weaknesses. Peugeot’s weaknesses are ingrained in their quality management and Opels’ are to do with a slightly inefficient engine range and an image problem (which frankly baffles me).
What could PSA do with Opel? I don’t see how Opel and Peugeot will be distinguished by image as are Skoda, Seat and VW (and even then it’s an increasingly flimsy set of differences) unless one of the two firms is forced, as Rover was, into a sector that is wrong for them. Let´s assume it’s Opel that does the repositioning: sportier? more conservative? cheaper? Each one is wrong. Opel needs to be seen to be more dynamic as does Peugeot but Peugeot won’t want Opels to be more desirable in performance terms. Opel can’t be made more conservative as that’s the black hole whose gravity has been dragging on them for decades. And Opel can’t be cheaper as that will cut back on profitability and tread on Citroen’s toes.
From GM’s stand point, selling Opel will surpass the idiocy demonstrated in letting Saab die. The Opel Karl was engineered in Germany and is the basis of the Chevrolet Spark. The Corsa was engineered in Germany and forms the basis of the Opel Adam – while at present it is not used elsewhere in the GMpire (I might be wrong) a previous version (C) still lurks under several high volume models. The Astra, engineered in Germany, is the basis the the Buick Verano and Holden Astra and the Buick Cascada. The current Insignia (just going out of production) underpinned the Buick Regal, sold in the US and PRC. The next version will also be a Buick and a Holden. A derivative underlies the Chevrolet Impala and Malibu. The Insignia platform is essential for GM’s mid-sized saloon ranges across the world. Engineered in Germany, of course.
What I notice from this is that GM depends quite considerably on Opel’s technical input. So, will the sale include the Ruesselsheim technical centre? Will GM keep any of the factories? What does PSA get if they acquire some factories located in a saturated market? There are a lot of open questions.
Whatever happens if PSA buys Opel, it will mean less choice for customers (an Opel is not a Peugeot, they are distinct in design, sales and manufacture) and in all likelihood a big increase in misery for staff laid off in the name of efficiency.
[**This paragraph is lifted from a comment I made at the Guardian. I thought it too good to leave there.]