A deal sparks talk of car-industry mega-mergers

THE Peugeot 3008, a striking SUV, was voted European car of the year on March 6th, the eve of the opening of the Geneva motor show, an annual industry shindig. PSA Group, the maker of Peugeots and Citroëns, would doubtless view it as the second prize it scooped that day. News also came that the French carmaker was buying Opel (branded as Vauxhall in Britain), the European operation of America’s General Motors (GM). Few of the car-industry experts at the show, however, would call Opel a trophy.

The consensus was that GM was right to rid itself of a business that had lost money for 16 years straight. Opel has around 6% of the European market; that makes it too small and inefficient in a business where scale is key. It has been confined mostly to Europe for three reasons: the particular tastes of the region’s car buyers (for instance, for small diesel cars); tighter emissions regulations outside Europe; and GM’s fear of taking sales from its other brands further afield. The result has been to leave it boxed in and isolated.

Shorn of Opel, the American firm can redirect investment to China and America, where its profit margins are…Continue reading

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