Now Tavares, former number two to the head of the Renault-Nissan alliance, Carlos Ghosn, has taken a bold step. He’s acquired the unprofitable European operations of General Motors for €2.2 billion. This is made up of the German-based Opel brand and the UK-based Vauxhall brand. It hasn't made a profit since 1999. It has too many manufacturing plants spanning Germany, the UK, Poland, Austria, Hungary and Spain, and is watching its market share shrink year after year.
By buying Opel and Vauxhall, Tavares has made PSA Europe’s second-largest car maker behind Volkswagen, leap-frogging former employer, Renault. The combined company will initially employ about 220,000 people and make revenues of about €75 billion. Now Tavares needs to make Vauxhall and Opel profitable.
Part of the strategy is to use Opel as the group’s 'German' car brand outside Europe. Tavares hopes that in regions where there’s a reluctance to buy French cars, consumers will instead buy Opel. Then there’s the cost synergies to be gained by combining supply lines, parts bins and dealer networks. Perhaps Peugeot and Opel cars will be based on the same platforms?
In the medium-term, part of the turnaround is inevitably going to involve rationalisation of the manufacturing base, despite short-term assurances PSA will respect existing labour deals. Tavares has already warned Opel and Vauxhall workers plants are going to have to raise productivity and compete for survival. There’s a huge amount of fear in both the UK and Germany their factories will be the ones to go, despite Tavares saying the company could actually boost its presence in the UK in the event of a hard Brexit to ensure a pound-denominated supply chain.
Given his pedigree, don’t bet against Tavares pulling off this second turnaround. Many Opel and Vauxhall models remain immensely popular in their main markets, and potential sales abroad could drive up revenues at the same time as costs are stripped from the European operational base. Given the wafer thin margins in the European mass car market, just don’t expect the path to be straight.