Two days ago General Motors sold its Opel and Vauxhall brands to the PSA Group for 1.8 billion euros ($1.9 billion). By combining Opel and Vauxhall with PSA’s range of Peugeot, Citroen, and DS cars, the group is now the second largest auto manufacturer in Europe behind the Volkswagen Group. GM executives stated that the sale of Opel is due to the increasing level of investment required to make their cars competitive in the European market. They believe that money can be better used to grow sales in North America and China, as well as continue development on electric powertrains and autonomous driving. For years Opel has been plagued with rising debt and decreasing market share on the European continent. Both of which have hurt GM’s bottom line.
At one point in the 1970s, Opels were renowned for their reliability, and were held in the same esteem as Volkswagens. Then GM appointed Jose Ignacio Lopez to improve the brand’s profitability. Lopez went on a cost cutting spree which significantly reduced quality across Opel’s lineup. Opel saw its market share in Germany drop from 17 percent in 1995 to 8.4 percent in 2008. Meanwhile, the Great Recession caused all car sales to drop to 20 year lows, and Opel’s European workforce shrank from 50,000 to 35,000. Uncertainty over the brand’s future as the economy limped along cost Opel even more sales with German volume dropping to 5.2 percent in 2012. Although Opel has produced some good cars in recently, it has also recorded 17 straight years of financial losses.
It remains to be seen what will become of Opel as a brand. Both PSA CEO Carlos Tavares and General Motors CEO Mary Barra appear to have faith that the brand will survive. Opel vehicles are imported to the United States as Buicks, and have done much to improve Buick’s image. During the annoucement, GM promised that Opel will continue to provide Buick with vehicles for the foreseeable future. Tavares has reportedly stated that he hopes to take the Opel brand to markets where French cars are viewed unfavorably. Current Opel CEO Karl-Thomas Neumann is said to be working on a plan to turn Opel into an electric-only brand. The potentially game-changing Ampera-e based on the Chevrolet Bolt has just entered production. It offers a driving range of 500 kilometers, and beats a similar model from Volkswagen to market by three years. By the time the Volkswagen appears, Opel will hopefully already have a strong grip on the electric car market.
These promising reports aside, I don’t see much future for the Opel brand, at least in Europe. Currently, PSA has three main brands each covering a segment of the market. Citroen serves as the group’s entry level brand offering inexpensive cars for buyers on tight budgets. Peugeot is the middle brand with similar models as Citroen, but built with a few more features and upmarket styling cues. The recently introduced DS brand hopes to lure BMW, Audi, and Mercedes buyers looking for something different. There is not much room for Opel to fit in. Most if not all of its cars compete directly with a corresponding PSA model. Each brand’s lineup would have to be cut down to prevent too much overlap, and I’d be willing to bet that Tavares would be more reluctant to trim models from his flagship brands than he would from adopted Opel. Moving Opel out of Europe could work, and it is possible that it can become PSA’s electric car brand. We will have to wait and see what transpires in the coming years before an accurate picture can emerge.
