The Opel GT concept shown in Geneva last year. Could Opel reposition its brand image for new sales in markets around the world?

The Opel GT concept shown in Geneva last year. Could Opel reposition its brand image for new sales in markets around the world?

There's been a lot of talk recently about globalisation and the race to the bottom it engenders. Once costs have been ratcheted down so much through process improvement or a shift to the newest low-cost country, where do you go next? The whole globalisation rationale had been questioned recently, not least by the populist protectionism that helped get Donald Trump elected as US president.

My thoughts on this race to the bottom were brought into some more focus by the disclosure that PSA is in talks to buy GM's European arm. Accompanying this news was all the usual discussion about the deal bringing economies of scale, back office savings, end of duplication, reduced complexity and that the reduced competitive concentration in the market should bring some short-term pricing benefits. But then what? Europe's mass market has been in its death throes since the 1990s.

It could be argued that the only competitive set-up that would bring long-term relief is Sergio Marchionne's utopian or dystopian vision (depending on your viewpoint) of six global players that was doing the rounds at the time of the financial crisis.  "By the time we finish with this in the next 24 months, as far as mass-producers are concerned, we're going to end up with one American house, one German of size; one French-Japanese; one in Japan; one in China and one potential European player," Marchionne said at the time.

Europe's mass market makers can cut costs all they like, but they'll always be the victims of a pincer movement by the premium and low-cost brands that has eroded their position in many key segments for over 20 years. Consider Ford and its Mondeo. It's hard to believe that in the early 1990s that it alone supported a 400,000+ capacity plant in Genk, Belgium. The plant itself is now gone of course, while the Mondeo itself tries to make ends meet three ways: platform sharing; plant sharing and playing second fiddle to Ford's US market Fusion. And Ford is not alone - the same's true for almost all mass market D-segment entries. Renault's former large car plant at Sandouville is now turning out commercial vehicles, which are a far more stable and sustainable proposition for Renault's former large car plant. The one exception to this rule is VW's Passat which continues to thrive thanks to VW's lofty brand position in Europe.

And it's not just the D-segment. That was just the first point of attack from the premiums as it overlapped with their natural territory. BMW, Mercedes-Benz and Audi are at various stages of their incursions into segments B through to C.

In response the mass market players have jumped into the lifeboat marked "crossover all shapes and sizes" but found that their predators have hold of the oars and rudder. This desperation has led to a dizzying array of crossovers entering the market, some of them even from the same brand. Look at GM's future entrants – Mokka X, Crossland X and Grandland X – a lineup that's repeated at plenty of mass market OEMs in Europe that now have congested product chessboards where more white space can be seen in a coal mine.

This intensely competitive situation has proved too much for GM. The company itself must be nauseous from dizziness as it's been turning around in Europe for nearly 20 years all to no avail. It's not made a net profit in Europe since 1999, which is a far cry from the position it enjoyed in the early 1990s as the most profitable European automaker.

The synergistic savings that PSA believes it can wring from any deal will soon be eaten away by the market and who's not to say that a PSA/GM deal will set the hares running elsewhere and ratchet competition up further and erode any advantage brought by the deal? Furthermore, while Carlos Tavares' comments  - that PSA plans to use Opel's German heritage to its advantage as an international brand that reaches parts of the world where French brands can't reach - may provide some expansionist relief for the two if they combine, the fact of the matter is that this won't be easy to achieve standing on the burning platform that is Europe. Additionally, pursuit of Opel in this case seems to be affirmation that DS has failed as a concept as noted by just-auto's Glenn Brooks. The DS strategy was rooted in sound principles: evoke Citroen's design and avant-garde heritage and address the incongruity that France leads the world in all premium goods save for cars. However, the premium end of the global car market is crowded with long-established brands that make it very difficult to gain a significant presence over a reasonable timeframe (as the experiences of Lexus and Infiniti have demonstrated).

It's not only the current competitive climate that will have European auto executives laying awake at night. The charge for autonomous vehicles and electrification is only going to add more cost. According to McKinsey, the electronic content of the average vehicle's bill of materials (BOM) will have increased from about 20% in 2012 to 40% in 2016. What's more a traditional internal combustion engine will have accounted for 30-40% of a vehicle's BOM five years ago. Now OEMs are looking at adding the costs of electrification, EU6c compliance, tightening fuel economy regulations and future technology like VCR, HCCI and waste heat recuperation.

Options to recoup and cover some of these costs are limited. In such an intensely competitive environment customers won't be paying higher prices any time soon. Nor is decontenting vehicles a viable option for the OEMs as the connectivity arms race takes hold. Moore's law might help a bit, but the only real course is to restructure and consolidate.

The intense round of cost-cutting and job losses that would undoubtedly follow will arouse interest from politicians. A thriving automotive industry is a great national prize for many economies simply because of the value of the industry's economic multiplier. And that in turn could prompt protectionist policies in Europe, which brings us neatly back to the beginning of this piece.