GM and PSA CEOs Head Off To Germany For Discussions As Backlashes Begin

Yesterday, news broke that General Motors and PSA Group (owner of Peugeot and Citroen) were in discussions on possibly selling Opel and Vauxhall. Already, the possible sale is under intense scrutiny from various European governments and unions. There are concerns about jobs being cut with this deal, and none are too happy that officials from local governments and unions were not included in the talks. There is also the possibility of political backlash coming to Germany and France as both will be holding elections later this year.

"It's unclear whether GM will keep an Opel stake, who pays what and if anything will go through at all, given the political backlash," a source told Reuters.

GM and PSA have declined to say what possible cuts to the workforce, plants, and other items that could be part of the deal. GM Europe employs roughly 38,000 workers - 19,000 are in Germany.

“Almost all experts say that with this deal now being prepared between the large French, almost state-owned conglomerate and Opel, that especially the German Opel plants may be on the losing side,” saud Rainer Einenkel -- former works council chief at Opel’s Bochum plant, which was shut down.

“The government has an interest in a successful future for the company and its sites. The government will, in light of the talks it’s holding with all parties involved, form an opinion,” said Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman.

Over in Great Britain, there are concerns of Vauxhall being on the chopping block. Part of this comes from Britain deciding to the European Union. By leaving, the country would lose access to the EU Single Market which guarantees unconstrained trade across the member states. It would mean various countries would be leveraging tariffs on British-made goods, making production in the country less competitive. Also, if the deal was to go through, Vauxhall could be one of the first things to go when it comes time to cut costs.

Unite, the British worker's union said the president of GM gave them assurance last year that there would not be any surprises in terms of GM's plants in Britain. With this deal, the union says those commitments had not been held.

"It cannot be that the future of UK car workers’ jobs now lie in the hands of the French government and their backing for Peugeot," said Unite General Secretary Len McCluskey.

Because of this, General Motors and PSA Group find themselves in damage control mode. GM CEO Mary Barra sent a memo to staff in the U.S. and Germany explaining the deal would be good for GM's future growth, the longevity of Opel's German operations, and shareholder value.

“While there can be no assurance of any agreement, any possible transaction would enable PSA Groupe and Opel Vauxhall to leverage their complementary strengths, enhancing their competitive positions for the future in a rapidly changing European market,” said Barra in the message.

A source tells Bloomberg that Barra and GM President Dan Ammann plan to meet with German government officials sometime in the future about the deal. Next week, PSA Group CEO Carlos Tavares will meet will officials. According to a source, Tavares plans on keeping Opel's management structure and keeping the brand as a German one.

Source: Bloomberg, Reuters, 2