PSA Group announces strategy for Opel

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2018 Opel Insignia GSi

2018 Opel Insignia GSi

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Opel has been a money pit going on two decades. It’s arguably the main reason General Motors finally decided to sell the brand to France’s PSA Group, which also controls the Citroën, DS and Peugeot brands.

PSA itself wasn’t in ideal financial shape not long ago but the company was turned around by current CEO Carlos Tavares who took the reins in 2014. He achieved this primarily by implementing painful cost-cutting measures while increasing market share in China.

Now he plans to do the same to Opel, whose sale to PSA Group was only finalized in August.

A new strategy for Opel (and Vauxhall, the name Opel operates under in the United Kingdom) was announced on Wednesday. Called PACE!, the strategy calls for a return to profitability and a 2 percent operating margin by as early as 2020, with the margin rising to 6 percent by 2026.

All actions should also lower Opel’s break-even point to 800,000 vehicles, and the good news for workers is that the intention is to refrain from forced redundancies. Opel delivered 1.16 million vehicles in 2016 but still lost $257 million.

PSA Group CEO Carlos Taveres and GM CEO Mary Barra

PSA Group CEO Carlos Taveres and GM CEO Mary Barra

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Specific strategies include full integration with PSA Group’s other brands in an effort to achieve synergies of 1.1 billion euros by 2020 and 1.7 billion euros by 2026. Among the synergies will be manufacturing and logistics efficiency gains and access to PSA Group platforms and other technologies.

Altogether, the number of platforms Opel uses for its passenger cars will be reduced from currently nine to two by 2024. Furthermore, the powertrain families will be optimized from currently 10 to four. PSA Group’s platforms include the CMP design for subcompact cars and the EMP2 for compact and mid-size cars.

Another key will be expanding Opel to more markets, something GM only did on an extremely limited basis. In contrast, under the PACE! Strategy, Opel will enter more than 20 new export markets by 2022 and be on the lookout for even more opportunities. The brand will also strengthen its commercial vehicles portfolio.

Finally, there will be a push to electrify the entire Opel lineup in Europe by 2024 and make Opel’s R&D center located in Rüsselsheim, Germany the global competence center for the entire PSA Group.

Overseeing the strategy at Opel will be Michael Lohscheller, who took over from former CEO Karl-Thomas Neumann in June.

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