Opel/Vauxhall: GM lost money over two decades; PSA made money in the first year

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Thread: Opel/Vauxhall: GM lost money over two decades; PSA made money in the first year

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    Opel/Vauxhall: GM lost money over two decades; PSA made money in the first year

    PSA profits from Opel/Vauxhall when GM couldn't; Peugeot's coming to the U.S.
    GM lost money over two decades; PSA made money in the first year
    ANTTI KAUTONEN
    Feb 26th 2019
    autoblog.com

    France's PSA, the company behind Peugeot, Citroën, DS, Opel and Vauxhall, has some major news today: Its Push to Pass and PACE! plans have driven it to historic profitability. With 3.88 million vehicle sales across the group, PSA's sales are up 6.8 percent for 2018, and revenue has increased by 18.9 percent to $84 billion. Operating margin is a record 8.4 percent, and for the years 2019-2021, PSA has targeted a profit margin of 4.5 percent.

    A remarkable part of this is that the recently acquired Opel and Vauxhall are profitable in PSA's first full year of ownership, after two decades of losses. We'd imagine the brands' former runner, General Motors, is looking into PSA's numbers quite intensely. The PACE! plan included cutting marketing costs, per-car costs and simplifying the Opel-Vauxhall engine and platform count by basing new models on existing PSA hardware.

    Now that PSA is "sustainably competitive," there are more plans for expansion. PSA aims to become a truly global vehicle manufacturer, and this means increasing sales outside of Europe. The target is improving sales by 50 percent by 2021, and in the following years its brand portfolio is taking strides in new or improvable markets.

    CONTINUE AT LINK ABOVE
    Last edited by nadepalma; 02-27-2019 at 05:54 PM. Reason: Reformatted; moved to newsticker

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    Re: GM lost money over two decades; PSA made money in the first year

    I'm thinking this is apples and oranges and the conclusion that PSA did something GM couldn't and should not be taken at face value. When GM sold Opel they did not transfer the underfunded pension liability if I recall, that's a huge piece right there. And what other accounting differences are there? And by not having that huge pension shortfall, PSA now has funds freed up to invest in product. If GM handed Opel to PSA with all the liabilities intact, I bet the story would be a lot different.

    This smacks of a little more of a puff piece "look at what stupid GM couldn't do but we can" with little actual research done.

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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by BlackGTP View Post
    I'm thinking this is apples and oranges and the conclusion that PSA did something GM couldn't and should not be taken at face value. When GM sold Opel they did not transfer the underfunded pension liability if I recall, that's a huge piece right there. And what other accounting differences are there? And by not having that huge pension shortfall, PSA now has funds freed up to invest in product. If GM handed Opel to PSA with all the liabilities intact, I bet the story would be a lot different.

    This smacks of a little more of a puff piece "look at what stupid GM couldn't do but we can" with little actual research done.
    Exactly correct. Was the author named Rupert?

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    Re: GM lost money over two decades; PSA made money in the first year

    The pension deficit was ADDITIONAL to the operating losses that Opel/Vauxhall was producing - PSA's plan was to return Opel/Vauxhall to profitability within 3.5 years with an operating profit of 2% - Opel/Vauxhall has done that in 2 years less and produced an operating profit of 4.7%.

    GM transferred a division making an operating loss which is now making an operating profit - I always suspected that some of GM's accounting was "smoke & mirrors" specifically by making Opel/Vauxhall fund development out of operating revenue and then double-charge the use of GM IP rights for development already paid for by Opel/Vauxhall - so there may well be differences in accounting which mean comparing apples and pears.

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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by wallus13 View Post
    Exactly correct. Was the author named Rupert?
    Read the figures, interpret them your own way.

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    Re: GM lost money over two decades; PSA made money in the first year

    I doubt that anything changed substantially in PSA's operations in so short a time. If it's now profitable, it's not likely through some miracle worked by Peugeot. Perhaps accounting differences with GM taking various charges and declaring an Opel loss.
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    Re: GM lost money over two decades; PSA made money in the first year

    Pension liability was not necessarily an expense. Of course a profit can come from accounting changes though.
    Last edited by kool1; 02-27-2019 at 01:35 PM.

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    Re: GM lost money over two decades; PSA made money in the first year

    The difference is no funky GM accounting cooking the books

    Shifting losses from one division to another
    Who the hell approved this abomination? Hidden Content

    I bet it was some dumbarse in Detroit Hidden Content

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    Re: GM lost money over two decades; PSA made money in the first year

    It’s just more thinly veiled ‘America sucks and Europe, China, Australia, etc is awesome’ nonsense. The reality is that GM undoubtedly had liabilities/negative fiscal realities with Vauxhall/Opel that they couldn’t simply ignore while they owned those brands but which a potential new owner doesn’t necessarily have to assume and/or simply isn’t subject to in a sell off. A sell of in such a reality would end up instantly bettering the position of PSA with these brands versus the previous owner. That creates a situation where the brands have greater actual value to the buyer than they do to the seller allowing GM to potentially fetch a higher price than the actual value the brand holds for them while also allowing GM to more quickly deal with any liabilities they have retained in the process.

    We saw some of this with the sale of JLR to Tata by Ford. Unfortunately, the honeymoon phase a sale like that creates is always temporary and, if the remaining flaws that led to the problems the seller once had with said brand aren’t dealt with, the new owner can expect to be dealing with those issues themselves at some point. And indeed we are now seeing this problem with JLR as the honeymoon phase has ended. We’re even hearing vague rumors that Tata might be looking to sell off JLR.

    PSA needs to make the most of this phase and move very, very quickly or, just like JLR, these early victories which seem easy to come by now will quickly gave way to something else.
    Last edited by SVT74; 02-27-2019 at 02:11 PM.

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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by Ruperts Trooper View Post
    [...]
    GM transferred a division making an operating loss which is now making an operating profit - I always suspected that some of GM's accounting was "smoke & mirrors" specifically by making Opel/Vauxhall fund development out of operating revenue and then double-charge the use of GM IP rights for development already paid for by Opel/Vauxhall - so there may well be differences in accounting which mean comparing apples and pears.
    I think sharing the (modular) platforms, engines and technology within PSA is one of the key points here. Opel seems much more integrated as it ever was under the umbrella of GM.

    Btw, did you see the new Peugeot 208? Some handy little car. I hope the new Corsa looks as good as this.


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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by damnitgmi View Post
    I think sharing the (modular) platforms, engines and technology within PSA is one of the key points here. Opel seems much more integrated as it ever was under the umbrella of GM.

    Btw, did you see the new Peugeot 208? Some handy little car. I hope the new Corsa looks as good as this.

    PSA Groupe has just two FWD/AWD platforms just as VW Group have.

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    Re: GM lost money over two decades; PSA made money in the first year

    I’m still amused that the cheering for PSA we’ve seen thus far completely ignores the fact that PSA now is in possession of three distinct mainstream brands (Opel and Vauxhall don’t really warrant distinct mentions here) Is there another automotive manufacturer that owns that many mainstream, volume outlets all of which will be competing in the same markets? I don’t think so. And this without a real premium brand in the fold? Considering that we are discussing an automaker primarily competing in a market where volume brands are struggling with profitability and premium brands are on the rise how is this not giving people pause?

    That should absolutely be worrisome and, long term, will pose serious problems if not dealt with. And I have no idea how you would posssibly deal with that while keeping all three brands? On the other hand Peugeot returning to the U.S. market is a great idea. I expect Opel to follow if logic prevails here.
    Last edited by SVT74; 02-27-2019 at 02:40 PM.

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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by SVT74 View Post
    I’m still amused that the cheering for PSA we’ve seen thus far completely ignores the fact that PSA now is in possession of three distinct mainstream brands (Opel and Vauxhall don’t really warrant a distinct mentions here) Is there another automotive manufacturer that owns that many mainstream, volume outlets all of which will be competing in the same markets? I don’t think so. And this without a real premium brand in the fold? Considering that we are discussing an automaker competing in a market where volume brands are struggling with profitability and premium brands are on the rise how is this not giving people pause?

    That should absolutely be worrisome and, long term, will pose serious problems if not dealt with. And I have no idea how you would posssibly deal with that while keeping all three brands? On the other hand Peugeot returning to the U.S. market is a great idea. I expect Opel to follow if logic prevails here.
    VW Group have VW, Seat and Skoda competing in most markets - more if you include Audi - VW Group does it successfully - GM used to do it with Chevrolet, Pontiac, Oldsmobile and Buick but ultimately unsuccessful with that many brands.

    PSA Groupe's initial expansion will be Peugeot into North America, Opel into Russia and Citroen into India

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    Re: GM lost money over two decades; PSA made money in the first year

    Anything American is bad.. GM is a true representative of America.. and how people feel about America. And many AMERICANS do little to boost the reputation of either. Its pathetic.. and it makes me sick. Swear to God I wish that I take back my service to this country.

    GM was starting to recover right before they decided to sell to PSA. 2014 -$1.4 billion, 2015 -$813 million, 2016 -$257 million.. the decision was made to get rid of GM Europe because it was getting ready to run head first into negative headwinds in Europe, including Brexit. I'm surprised that other NON-European companies didn't follow. PSA, a French company is partially owned (14%) and subsidized by France.. similar to VW, which is actually partially owned by the German government (20%). They are literally GOVERNMENT MOTORS.. One must realize that does not strike a negative in European countries.. unlike in America

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    Re: GM lost money over two decades; PSA made money in the first year

    Quote Originally Posted by Ruperts Trooper View Post
    VW Group have VW, Seat and Skoda competing in most markets - more if you include Audi - VW Group does it successfully - GM used to do it with Chevrolet, Pontiac, Oldsmobile and Buick but ultimately unsuccessful with that many brands.

    PSA Groupe's initial expansion will be Peugeot into North America, Opel into Russia and Citroen into India
    I think that is a bit apples and oranges. First, VW is a massively larger company than PSA with a myriad of luxury brands that spread their market position among several different strata. They are just fundamentally better suited to be able to weather and address problems and changes in the market because of that. Further, I don’t think that answer accounts for the fact that Seat remains somethingg of an aside within the VW empire and that Skoda was, until recently, something of an aside itself. Also worth noting here is the fact that, since the recent rise of Skoda to a more significant brand within the European market, there have been wrinkles within the VW Group.

    If anything, I think this just gives us more reason for concern. And while internet pundits like us ignoring those issues won’t make any difference whatsoever, PSA ignoring them might. Just look to JLR for example. Several potential issues were ignored there and, despite the post-sale euphoria of a decade ago, they have now come home to roost. In my opinion PSA needs a plan here that addresses the very real concerns that three volume brands under the roof of one automaker with limited market footprint and limited global scope can bring and they need to say what that plan is.

    Peugeot returning to the U.S. does that in part, but I would argue that it needs to be more sweeping than that. Russian and Indian expansion don’t really offset much here for me.

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