Daily Management Review

These Brands Sold By GM A Year Ago Are Making Millions For New Owner


These Brands Sold By GM A Year Ago Are Making Millions For New Owner
The brand Opel and Vauxhall were a source of huge loss for General Motors and they were sold off by the US car manufacturer about a year ago. However, those very brands have turned out to be cash cows for their new French owners and are making hundreds of millions.
In the first six months of the current year, an operating profit of €502 million ($587 million) has bene generated by Germany's Opel and its UK sister brand Vauxhall, the PSA Group said on Tuesday.
This marks a very dramatic turnaround for the two brand that were cold off by GM in August 2017 for €2.2 billion ($2.6 billion) following years of loss made by the brands for GM.
Following the reporting of the earnings, there was a surge of 14% in the stocks of PSA  - also the owner of Peugeot and Citroën, in Paris.
A focus on selling more profitable models, cost reduction and more efficient management drove the significant shift, said Philippe Houchois, an auto analyst at Jefferies.
In the first half of 2018, nearly 572,000 Opel and Vauxhall models were sold by PSA, which was lower compared to the 609,000 vehicles that GM had sold in the same period last year. Houchois said that many of the cars sold by GM were unprofitable.
The company has slashed its fixed costs by almost 30%, it said.
Making use of more components produced by PSA and negotiating better prices from suppliers helped the companies achieve this, said Houchois. Additionally, workers were offered voluntary retired packages and expenses on marketing were reduced by the French company.
Houchois said that credit also has to be given to PSA chief executive Carlos Tavares.
"There's a drive [in Tavares] that we cannot underestimate," he said. "He's got some of the management style of Sergio Marchionne," the charismatic auto executive who turn around Fiat.
According to Houchois, in contrast, GM managers had "neglected" Opel and "failed to grasp what was going on in Europe".
PSA is now seeking to expand the growth of the brands beyond Europe after achieving a recovery of the brands.
In the next five years, export of Opel to 20 new countries is being planned by PSA. Karine Douet, a spokesperson for PSA said that v are South Africa, Tunisia and Egypt.
"This is just the beginning," she said.
Opel was owned by GM for more than a century before it was sold off to PSA. A full-year profit had not been posted by the US carmaker for its European operations since 1999.