PSA Group reveals plan to make Vauxhall and Opel profitable by 2020

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9 November 2017

The PSA Group has unveiled its plans to make Vauxhall and Opel a success following its acquisition of the firm earlier this year.

Highlights include launching all future products on PSA platforms - including an all-new Vauxhall Corsa in 2019 - and setting the goal of keeping all current plants including Ellesmere Port and Luton in the UK open, although potentially on altered terms.

Vauxhall and Opel declared losses of £190 million in the second quarter of 2017; daily losses at the firm under GM ownership were estimated to be in the region of £3m on average. PSA Group announced its plans to take over Vauxhall and Opel from parent company GM in March 2017.

Carlos Tavares, the CEO of the PSA Group, has described the need to implement the plan "as a matter of urgency", citing the losses and calling for the workforce, union and suppliers to pull together to find solutions to the issues the firm currently faces.

The announcement, made by newly appointed CEO of Opel Automobile GmbH, Michael Lohscheller, included:

• Setting the goal of returning Vauxhall and Opel to profit by 2020.

• Achieving an operating margin of 2% by 2020. The VW Group achieves around 4%, while PSA hit 7.3% this year. Lohscheller has then set the target of a 6% margin by 2026.

• Instigating measures to make the breakeven point for the firm 800,000 sales a year. Vauxhall and Opel sold 984,000 cars last year but recorded a loss. Its worst year was in 2013, when it sold 824,000 cars.

• Offering electrified versions of all Vauxhall and Opel cars by 2024. This will include a pure electric version of the Corsa and a plug-in hybrid version of the Grandland X.

• A pledge to “modernise” all plants with the goal of keeping them all open. It was acknowledged this might require job cuts, but the stated goal is to make them voluntarily.

• Launching all new Vauxhall and Opel models on PSA’s CMP and EMP2 platforms, including the next, all-new Corsa in 2019. This will reduce the number of platforms in use from nine to two. Powertrain families will reduce from 10 to four.Vauxhalls will also use PSA engines and powertrains. All vehicles will be engineered at Opel’s plant in Rüsselsheim.

• A pledge to launch one new major new model per year; counting bodystyles, nine new models will be launched by 2020. This will start with a new Combo in 2018 and a new Corsa in 2019.

• Opel will enter more than 20 new export markets by 2022, including China and the Middle East.

In order to achieve these goals, Lohscheller set the target of saving €1.1 billion (£970 million) by 2020 through synergies between the PSA Group and Vauxhall and Opel by 2020 and €1.7 billion (£1.5bn) by 2026. Lohscheller has set Vauxhall and Opel the target of reducing the costs of manufacturing each car it makes by €700 (£618) by 2020.

While Lohscheller pledged to try to keep factories open, he acknowledged that the need to improve competitiveness meant that model line production would move as Vauxhall and Opel plants were kitted to build PSA-platformed vehicles.

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While there was no specific reference to the UK’s Ellesmere and Luton plants, the future of which have been in the spotlight in the wake of the Brexit vote, the Vauxhall and Opel statement read: “The plan is designed with the clear intention to maintain all plants and refrain from forced redundancies in Europe.

“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.”

It was confirmed that an EMP2-based SUV would be built at the Eisenach plant from 2019 and an an EMP2-based D-segment vehicle at Rüsselsheim in the future.

“This plan is paramount for the company, to protect our employees against headwinds and turn Opel and Vauxhall into a sustainable, profitable, electrified, and global company,” said Lohscheller. “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.”

Carlos Tavares, PSA Group CEO, on the Vauxhall and Opel turnaround plan:

“To be here 100 days exactly after the closing of the deal, with the Opel management presenting the plan is a clear sign of rigour and professionalism - and we need both those things, plus discipline, to implement this very strong plan.

“This plan is not a gimmick. It is robust, honest and built by the Opel employees for the Opel employees. But creating the plan is 5% of the work. We have 95% of the work in the implementation ahead of us.

“If look at this company over past 15 years it is a fact it did not prepare for future. It was not on track to meet European CO2 requirements, for instance. We also have to recognise - in an honest and peaceful way - that this company has lost more than $10 billion in cumulative losses, cut more than 30,000 jobs and lost three points of market share in Europe in that time. This is a fact.

“It is where we start from. It is of course a dramatic situation and, taking into fact the headwinds in Europe, this means the situation is getting worse day by day. This means we have an opportunity to rescue this company and bring a solution to the Opel employees. It is fair to say that over the last 15 years, looking at the results, we have not given them a solution.

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“It is my belief that the unpopular leaders of today will be the heroes of tomorrow. Managing a car company, taking all the right decisions to deliver recurring profit, is not an easy task, but it is a rewarding one. There will be decisions people don’t like but which work. The goal is that we can hand over a company to the next generation of leaders that works and that has the ability to invest in its own future."