GEFCO will benefit from GM Opel/Vauxhall sale

The agreement by General Motors to sell its European business to PSA Groupe is not quite as shocking as it once would have been, however it still represents a significant change not just for the way that General Motors views its own business, but also for the European automotive sector as a whole.

Today (March 6, 2017) the two companies agreed a deal whereby PSA will buy the whole of GM Europe, consisting of the Opel and Vauxhall brands, their associate assembly plants and finance subsidiaries, for €2.2bn. Combined, the two companies have a market share of 16-17% in Europe, if measured on the number of cars sold.

The move is significant for several reasons. General Motors has always viewed economies of scale as central to its business. The ability to amortise costs, including R&D and purchasing, as well as fixed assets such as assembly plants, demanded a global presence. Retreating from one of the largest markets in the world is a significant blow to this business model.

General Motors Europe sold smaller, cheaper cars which generated minimal profits and this was a major reason why its business failed in Europe. Its product line-up is right for the US and China but not for Europe.

PSA Peugeot-Citroen has staged a near miraculous recovery over the past two years. Yet it too faced to problem of dependency on the small car segment. Buying Opel and Vauxhall is an attempt to consolidate the market and increase competitiveness against Volkswagen.

The implications for the logistics market are substantial. It is hard not to see PSA driving even larger volumes into its one-time subsidiary GEFCO. It already handles a very large proportion of GM/Opel/Vauxhall business under a collaboration agreement signed five years ago, and presumably this will increase beyond just ‘4PL’ services but into physical assets as well. This is likely to mean better returns on GEFCO’s warehousing and finished vehicle infrastructure but also a considerable increase in both GEFCO and PSA’s purchasing power.

It is also probable that in the long-term the new enlarged PSA Groupe will rationalise its production base. Whilst the political pressures in France and Germany will be acute, the economics strongly point to a shift eastwards and an expansion in PSA’s existing central European assembly operations. This could also apply to much of GM Europe’s warehousing assets as well.

Therefore, the implications of the takeover for the automotive logistics market in Europe is one of consolidation and a shift eastwards.

Source: Transport Intelligence, March 6, 2017                                                                 

Author: Thomas Cullen