US analysts are mostly in favour of the sale of General Motors' European operation Opel (and Vauxhall) to PSA, announced earlier today.
From Karl Brauer, executive publisher for Autotrader and Kelley Blue Book: "GM's focus on streamlined, profitable operations has been clear ever since Mary Barra took the helm. Selling Opel is another sign of GM's interest in healthy financials over volume or market reach. The automaker's European operations have been a money loser for years while other regions, such as China, are showing continued growth and profitability. This is a smart move for a company that sees far more potential in other global markets while also investing heavily in the autonomous future of personal transportation.
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Michelle Krebs, executive analyst for Autotrader: "GM has long struggled to turn a profit in Europe, and it profitability became even more elusive in the new political and regulatory environment. The sale of Opel provides GM with cash for investments in product and growth opportunities in other regions."
Rebecca Lindland, executive analyst for Kelley Blue Book: "Opel/Vauxhall was a profit losing puzzle no one at GM could solve for decades, and outside forces such as Brexit and an increasingly complex regulatory environment did not help the situation.
"Unloading its European operations greatly improves GM's balance sheet, allowing investments in growing markets such as China and India and frees up capital for further expansion into ride and car sharing and autonomous vehicles.
"For PSA, the acquisition should provide bargaining power with its suppliers and economies of scale. But production cost savings will be challenged by the powerful labour unions of Germany, the UK and France.
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By GlobalData"The European Marketplace, like the US, is not expected to grow in the coming years. PSA and GM, like everybody else, will look to the enormous potential in both China and India for expansion. PSA has toyed with re-entering the US for decades. But even with this deal, a return is not likely given the highly saturated and mature state of the US market."
Ahead of the deal announcement, Krebs had said: "With the purchase of Opel by PSA, General Motors will be free of an operation that has long been a money loser, with little hope of turning the corner anytime soon."
Lindland added: "In Mary Barra's GM, hard decisions are made with an eye on maximising capital and satisfying investors. When coupled with increasingly complex regulations related to emissions, plus Brexit, selling Opel makes sense."
"There's no questioning Tavares' talent for cost-cutting and the financial attractions of the deal. But it's far from certain he will be able to turn around the Opel and Vauxhall brands."
Bloomberg Gadfly columnist Chris Bryant sounds a note of caution: "There's no questioning Tavares' talent for cost-cutting and the financial attractions of the deal. But it's far from certain he will be able to turn around the Opel and Vauxhall brands.
"Firstly, carmakers are facing huge structural upheaval from the spread of driverless and electric vehicles.
Right now, European car sales are booming – but things could look very different in 2020. Though PSA is free to start selling Opels outside Europe, boosting plant capacity utilisation will be tough if vehicle sales enter a cyclical decline.
"Tavares might then have to start closing plants, but doing so would surely mean he'd lose the co-operation of GM's European workers who he insists are key to turning round the company."
Bryant adds: "Then there are broader strategic doubts. PSA and Opel both sell lots of compact cars and not enough of the SUVs customers increasingly want. Both carmakers are heavily focused on Europe – when much of the car industry's future growth is set to take place elsewhere.
"GM has belatedly faced up to its inability to sell cars profitably in Europe. Tavares has turned round PSA. But repeating that trick at Opel could yet prove to be a leap too far."
