To ensure they’re at the same eye level, the new Opel CEO Michael Lohscheller sits on a stool as he smiles and shakes the hand of his new boss, the significantly shorter but considerably more powerful Carlos Tavares. The CEO of France’s PSA Group, makers of Peugeot and Citroen, came to Opel headquarters in Rüsselsheim, just outside Frankfurt, to seal the deal he spent months negotiating. “This is a historic day,” Mr. Lohscheller says. As of Tuesday, after 88 years under the umbrella of American parent company General Motors, Opel is now French.
The sale will be complete at the end of the year, when GM’s European business is transferred to the French company. The sale marks the beginning of a new era for the German car brand. As per the March agreement, PSA is paying GM €2.2 billion ($2.6 billion) for Opel and the British Vauxhall group. It also marks the end of a period of uncertainty for Opel, whose managers can now finally speak openly with the new parent company about how to reorganize the brand.
Mr. Tavares is giving Mr. Lohscheller 100 days, or until November, to develop a strategy for saving Opel and preserving its independence. Mr. Tavares has repeatedly stressed that the amount of latitude he grants the company will depend in part on its profitability. Most recently, he emphasized that Opel would have to handle the transition independently. But the adage “trust is good; control is better” is at work. When the sale is complete, Mr. Tavares will send several top managers from Paris to fill key positions at Opel headquarters.
Philippe de Rovira is moving from PSA headquarters to Opel to head up finances. Mr. de Rovira, who has a reputation as a cost cutter, reports directly to Chief Financial Officer Jean-Baptiste de Chatillon. Mr. de Rovira developed the company’s “Back in the Race” and “Push to Pass” restructuring plans, which could be a blueprint for Opel. The Frenchman knows exactly what works and what doesn’t, say officials in Paris.
The second manager is Remi Girardon, who was leading strategy at PSA and will replace American Philip Kienle as the new head of production at Opel. He is expected to help Opel significantly improve capacity utilization at its plants in the coming years. Mr. Girardon brings plenty of relevant experience to the job and is considered someone who knows how to tackle problems. He managed several plants for the group, including one in Trnava, Slovakia, that is now one of PSA’s most productive plants.
Even though he is expected to come up with a plan quickly, Mr. Lohscheller has been given an astonishing amount of time to make the brand profitable again. PSA only expects profits from Opel in 2020 – to be exact, a profit margin of 2 percent. Then Opel will have until 2026 to increase its profit margin to 6 percent, comparable to PSA’s profit margin today.
Mr. Lohscheller stresses that he will make plans in close consultation with the works council and labor unions. Opel’s employees are relieved to see the end of a period when hardly any decisions could be made in Rüsselsheim. “The shorter the transition phase, the better it is for the company and the employees,” Wolfgang Schäfer-Klug, the head of Opel’s general works council, announced in a press release on Tuesday.
Before the transfer of operations, the employees had agreed to combine all Opel companies under the umbrella of Opel Automobile GmbH. The company and its employees had announced unanimously that worker participation in management would be preserved after the transfer to PSA. In the negotiating process, the employee representatives had repeatedly insisted that Opel’s previous commitments be written into the contract and had sometimes openly sought conflict.
Now that the sale is complete, it is time to “secure all locations and jobs in the Opel Group for the long term,” said Jörg Köhlinger, regional head of the IG Metall metalworkers’ union. State Secretary Matthias Machnig, who monitored the sales process on behalf of the German economics ministry, took the same line in a conversation with Handelsblatt. “PSA has the responsibility to present a future strategy for the new company,” he said.
“The shorter the transition phase, the better it is for the company and the employees.”
The latest quarterly figures show Opel still has structural problems. The company has lost even more market share recently, as well as posting millions in losses. It’s not for nothing that General Motors is incurring large costs to separate itself from the unprofitable European business.
In the last quarter alone, GM estimated write-offs related to the Opel sale at $1.3 billion. The total estimated costs amount to $5.5 billion including pension commitments. Opel, for its part, is hoping for some financial relief until its new management. According to Opel officials, the company wants to streamline its organization, shorten reporting paths and take advantage of synergies. The merger will enable Opel to save about €1.7 billion in purchasing, production and R&D.
The two top managers from France are expected to help Opel achieve these goals. They arrived at Opel headquarters Tuesday to take part in initial working groups and introduce themselves to employees at a town hall meeting, according to Opel insiders. Michelle Wen will round out the new Opel management in early September, when she moves from Vodafone to begin her job as head of purchasing.
Longstanding Opel CEO Karl-Thomas Neumann left the brand after the sale was completed, and Monday was his last day. With his departure, new lines of communication are opening in Rüsselsheim. Until now, antitrust rules had prohibited close cooperation between PSA and Opel, and scheduled working groups have many unanswered questions to address. So far, PSA has stressed that it will abide by all existing employment and location commitments, but the last of those commitments expires in 2020. The long-term future of Opel plants in Rüsselsheim, Eisenach and Kaiserslautern remains unclear. It is clear, however, that Opel and the other PSA brands are expected to jointly develop more models. Thanks to an earlier partnership, Opel’s Crossland X and Grandland X models will be built on a PSA platform. The Combo, a small delivery van, will also be produced jointly with PSA. The new Corsa is expected in 2019 and will also share a technical base with small cars from France, so further development of the Corsa has been put on hold.
PSA dismisses the fears that the models from Rüsselsheim will be French cars masquerading as Opels in the future, noting that the German engineering is what makes the Opel brand attractive. This is good news for the 7,000 employees. In addition, the International Development Center (ITEZ) in Rüsselsheim will continue development projects for General Motors, according to company sources.
A seasoned Opel employee will be in charge of development. Christian Müller, with Opel since 1996, will bring together the drivetrain and development divisions, which will also place him in charge of the ITEZ in the future. The employees are pleased with this step. “We are now getting what we have wanted for more than 15 years,” works council chairman Schäfer-Klug said. Under GM, the development departments were separate and the drivetrain division was even sold off for a short period. Rüsselsheim primarily developed engines and transmissions until now; it’s not entirely clear what role the development center will play in the PSA era.
The merger is “the birth of a real European champion,” PSA CEO Tavares said several times recently. The sales figures prove it: The PSA Group accounts for 17 percent of all new European car registrations, surpassing local rival Renault and taking its place behind Volkswagen. PSA recently benefited from revived auto sales in southern Europe, and Opel is strong in markets where PSA is traditionally weak – Germany and Great Britain. In this sense, the partners seem to complement each other perfectly.
But some market observers still doubt that a merger can be successful without layoffs. “A restructuring will hardly work without downsizing,” said Ferdinand Dudenhöffer, head of the CAR Institute at the University of Duisburg-Essen. He assumes PSA’s restructuring of Opel will be as tough as it was in France. In recent years, Mr. Tavares radically reduced the number of employees in the group, leading PSA to record profits.
Lukas Bay is an editor with Handelsblatt’s companies and markets desk. Thomas Hanke is Handelsblatt’s correspondent in Paris. Frank Specht is based in Berlin, where he focuses on the German labor market and trade unions. To contact the authors: email@example.com, firstname.lastname@example.org, email@example.com