Cutting costs and boosting profitability – that’s the short version of why a deal for PSA and its Peugeot, Citroën and DS brands to buy General Motors’ Opel-Vauxhall business has been completed.

It’s clearly big news. Last year, Opel-Vauxhall's sales in Europe were around the 1.0 million mark and PSA's at around 1.5m. By combining the two, you get a group that moves well clear of Renault-Nissan into second place in the European sales charts, behind only the Volkswagen Group (3.6m sales in 2016).

PSA takeover of Opel and Vauxhall completed

PSA's purchase of Opel-Vauxhall also brings significant economies of scale. The number of vehicle platforms and engines that need to be developed for five brands producing cars competing in the same market segments would be significantly reduced. To that end, PSA has said it will switch over Opel-Vauxhall models to its own platforms as their replacments are launched, and it has taken ownership of GM's factories in which to build them. 

Car makers are under more pressure than ever to make huge investments in the future of their businesses, not least around the issues of reducing emissions and technologies such as autonomous driving. Spreading that investment across more brands for a greater return lessens the risk of that investment in the first place.

Intriguingly, General Motors (GM) has kept hold of one part of its European operation, an R&D facility in Italy that leads diesel engine development. Clearly, GM thinks diesel still has a job to do. 

If successful, this deal would solve some long-standing profitability problems for Opel-Vauxhall. Although it is back on track, Opel-Vauxhall often has an air of uncertainty around it. Questions over factories aren't going to go away, even if they are secure in the short and medium term. These issues will need to be confonted. The Vauxhall nameplate does at least look safe, though, with PSA saying it would respect the heritage of the two brands it has acquired.

Led by boss Carlos Tavares, PSA has returned to profit and is increasing its profit margins all the time. Having an extra 1.0m vehicles a year to add into that formula would be a nice problem to have in accelerating the recovery. A short-term challenge perhaps, but potentially a lucrative one in the long-term. 

It’s five years since GM took a 7% stake in PSA, marking the beginning of the collaboration between the two firms. That stake was quickly sold off, but the collaboration continued, and we’re now finally seeing the first fruits of it with two new Vauxhall SUVs, the Peugeot 2008-based Crossland X and the Peugeot 3008-based Grandland X.

Who’s going to lose out? Well, those two SUVs already show that an overlapping platform strategy could lead to a confused product range, at least in the short term. Vauxhall already has an SUV of similar size to the Crossland X in the shape of the Mokka X. Now it has to have another spun off the 2008's platform to boost the profitability of that car’s underpinnings.