PSA looking for partial refund of Opel payment to GM over emission efficiency

4 December 2017 According to reports, French manufacturer PSA Group has requested a refund from General Motors (GM) following the sale of the US company’s Opel brand. Following the sale of Opel, which was completed in August, PSA has been looking at how to cut costs at the German brand, and its British subsidiary Vauxhall. At the start of November, a plan was published highlighting the future of Opel. However, throughout the process of putting the plan together, PSA chairman Carlos Tavares has been putting pressure on Opel, discussing the company’s efficiency, especially in its plants. However, in the plan, the company also mentioned that it would need to move Opel models onto its own more fuel-efficient technology faster than planned to cut CO2 emissions before new EU limits are phased in from 2021, backed by hefty financial penalties. The reason for the speed in this move is the French company’s belief that current Opel engines are too inefficient to meet CO2 emission reduction targets, according to news agency Reuters. The company, therefore, believes it is owed around €600 million after it was misled about Opel’s emission’s strategy. It intends to pursue a legal claim against GM on these grounds. PSA believes GM misrepresented Opel’s CO2 challenges and emissions trajectory during negotiations and due diligence before the acquisition deal which was ultimately agreed in March 2017. CEO Carlos Tavares has publicly hinted as much. ′We became aware a few weeks after we finalized the closing that the company was going to the wall on CO2 emissions,’ the PSA boss told reporters after presenting the heavily revised turnaround plan at Opel headquarters. ′We put our teams to work to completely rebuild the product and technology strategies,’ Tavares said. ′If you fail to comply (with EU rules) the weight of fines you are hit with can threaten the company’s existence.’ According to PSA, Opel’s original strategy to combat CO2 regulations was to rely on significant sales of the Ampera-e electric car, based on GM’s Chevrolet Bolt. However, each sale came at a loss of €10,000 per vehicle. Therefore the technical solution was economically unviable and would have led to huge losses for the company. Also, at the vehicle was based on a Chevrolet model, to continue sales, PSA would have needed to pay GM a licensing fee. Discontinuing this model was therefore imperative in saving the company money. Before the sale, Opel was on course to miss its CO2 target by 3.7 grams, according to a PA Consulting study published in November 2016. Stripping out the Ampera-e, then projected to reach 20,000 annual sales, the overshoot rose to six grams. But Opel’s real situation turned out to be even worse, PSA sources said, with the company on course to miss its CO2 goal by more than 10 grams – a multiple of the ′slight overshoot’ discussed in deal negotiations. A margin that large would incur EU fines approaching €1 billion euros. The gap partly reflects GM’s unrealistically high diesel sales assumptions and reliance on the Ampera-e, they said. Photograph courtesy of Opel