Opel posts Q2 losses as PSA decides on cost-cutting measures

04 September 2017

04 September 2017

Vehicle manufacturer Opel has widened its Q2 2017 losses to €210 million, following its sale to PSA Group from General Motors (GM).

The company is losing around €4 million each working day, according to company sources speaking to German publication Automobilwoche. The company made a loss of around €176 million in the first financial quarter of the year. However, with the sale being completed in August 2017, these latest figures reflect the last months of GM ownership.

PSA Group has already stated its intention to introduce cost-cutting measures to bring the manufacturer back to profitability. PSA CEO Carlos Tavares said in May he expects Opel to lose more money in 2017.

Under its previous ownership, Opel had been loss-making for around 16 years, as it was forced to spend around €840 million a year on research and development to help keep its small and compact vehicles compliant with European anti-pollution laws, which are very different to those in the US and China, GM’s largest markets. PSA plans to address this by introducing its own platforms to Opel, which would increase the economies of scale and efficiency for both companies.

Automobilwoche cited one PSA manager as saying that integration teams of high ranking representatives from PSA, Opel and GM met in Paris in the last week to discuss future strategy.

PSA agreed that Opel will set its own direction in many areas, although many Opel engines are likely to be replaced with PSA powerplants because they will not meet future stricter emissions rules. Worker representatives fear that only 800 out of Opel’s 7,700 employees in development will still be needed. PSA wants Opel to return to lasting profit no later than by 2020 with operating margin goals of 2% that year and even around 6% by 2026.

Meanwhile, in further cost-cutting measures, PSA has moved its operations out of the centre of Paris and into the city suburbs. Corporate leadership, including CEO Carlos Tavares, are now based in offices in Rueil-Malmaison, about nine miles west of central Paris. The company had previously been based in premises on Paris’s Avenue Grand Armee near the Arc de Triomphe since 1964.

The move was first announced in January 2015, three years after the carmaker sold its Paris HQ and started leasing the building. It is expected that the move will save the company around €10 million annually.

Commenting on the move, Xavier Chéreau, PSA Executive Vice President of Human Resources, said: ′These functional, modern, interactive spaces reflect our determination to encourage agility, collaboration and creativity among our teams, who are the driving force behind the Group’s performance. The new offices are also another illustration of our demanding yet cost-effective strategy.’

Photograph courtesy of Opel