Groupe PSA-owned Opel-Vauxhall has outlined a business plan that avoids plant closures and aims to put the company on a path to profitability by 2020. No plant closures are planned (for now) and the emphasis is on efficiency gains to lower breakeven. 

Groupe PSA chief Carlos Tavares described the situation for loss-making Opel-Vauxhall as 'dramatic' and said it faces headwinds in Europe as it strives to become profitable. However, he said there is a significant opportunity to rescue the company, building on the experience of the turnaround at PSA. "What has been done in the last 50 years did not work," he said. "That is a fact."

"There is no intention [from PSA] to micro-manage Opel-Vauxhall."

Tavares stressed the need for Opel-Vauxhall to lift its performance from within. "There is no intention to micro-manage Opel-Vauxhall," he said. "It is in the hands of the CEO and managing board. Management must manage." He also said that "people are not the problem, people are the solution."

The broader strategy is to build an enlarged PSA Group – which Tavares maintains is already successful with PSA's European plants running at 130% capacity – into a 'European champion'. He said the European sales base of 3m units a year provides a good foundation for leveraging global growth.

PACE! details

Michael Lohscheller, CEO of Opel Automobile GmbH, announced the strategic plan called 'PACE!' to 'restore financial fundamentals and enhance sustainable competitiveness and growth'.

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The company said that the goals for Opel-Vauxhall are a positive operational free cash flow as well as a recurring operating margin for the auto division of 2% in a first phase by 2020 and of 6% by 2026. It said combining strengths will unleash annual synergies on Groupe PSA level of EUR1.1 billion by 2020 and EUR1.7 billion by 2026.

It also said that all actions will contribute to a lower financial break-even point for Opel/Vauxhall of 800,000 vehicles, 'creating a profitable business model whatever the headwinds may be'.

Electrification was highlighted in the outline. By 2020, Opel/Vauxhall will have four electrified carlines on the market, including the Grandland X PHEV and the next generation Corsa as a fully electric vehicle.

The company also said it will enhance its competitiveness by 2020 by reducing costs by a planned EUR700 per car. Efficiency of marketing expenses will be improved by more than 10%, it said. Overall efficiencies will be increased by reducing complexity across all functions, Opel said.

Moving Opel-Vauxhall products to PSA engineering architectures is also an important element of the strategy. The two Groupe PSA platforms CMP and EMP2 will be localised in all Opel/Vauxhall plants. To start with, an EMP2-based SUV is planned for Eisenach in 2019; and an EMP2-based D-segment vehicle is coming to Rüsselsheim. The allocation of new powertrains in Opel/Vauxhall manufacturing sites will accompany the shift from GM to Groupe PSA engines and transmissions.

"PACE! will unleash our full potential. This plan is paramount for the company, to protect our employees against headwinds and turn Opel/Vauxhall into a sustainable, profitable, electrified, and global company. Our future will be secured and we will contribute with German excellence to the Groupe PSA development. The implementation has already started with all teams eager to achieve the objectives," said Opel CEO Michael Lohscheller.

Opel-Vauxhall said the plan is designed with the 'clear intention to maintain all plants and refrain from forced redundancies in Europe'. It said the necessary and sustainable reduction of labour costs shall be reached with thoughtful measures such as innovative working time concepts, voluntary programs or early retirement schemes.

All new Opel/Vauxhall vehicles will be engineered in Rüsselsheim, which will be transformed into a global competence centre for the whole Groupe PSA. First areas of expertise are identified, e.g. fuel cells, certain automated driving technologies and driver assistance developments.

Altogether, the number of platforms Opel/Vauxhall uses for its passenger cars will be reduced from currently 9 to 2 by 2024. Furthermore, the powertrain families will be optimised from currently 10 to 4.

"Aligning architecture and powertrain families will substantially reduce development and production complexity, thus allowing scale effects and synergies, contributing to overall profitability," said Lohscheller.

It is planned that Opel/Vauxhall will switch to efficient and flexible Groupe PSA vehicle architectures faster than originally expected. From 2024 onwards, all Opel/Vauxhall passenger car models will be based on joint Groupe PSA architectures. Next to come are the Combo in 2018 and the next generation of the Corsa in 2019. Opel/Vauxhall said it will launch nine new models by 2020. This line-up will enable to increase the pricing power of Opel/Vauxhall brands and reduce the gap against benchmark by four points.

New export markets

A strategy to add sales in overseas markets means that it is planned Opel will enter more than 20 new export markets by 2022. Beyond that, Opel will explore global midterm overseas profitable export opportunities.

To foster growth in the financially attractive light commercial vehicle (LCV) business, Opel/Vauxhall will launch new models and enter new markets with the clear goal to increase its LCV sales by 25% by 2020 against 2017.

"PACE! has been designed by Opel/Vauxhall for the benefit of our employees as an immediate performance booster," said Lohscheller.

Some analysts and commentators have suggested that Opel-Vauxhall plant closures could eventually be considered (particularly given Brexit changes to trade conditions on parts and vehicles between UK and EU, as well as long-term plant-model mix efficiency considerations and group platform strategy). However, it would seem that now is not the time for such a move.

See also: Opel-Vauxhall PACE! plan – the future models?

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