Monday, 17 April 2017

Europe: GM Wants Out


It seems getting out of Europe is the 'in thing'. The politics and trying to work with the system is a challenge. While pretending to be united, nations shamelessly pursue their vested interests. Governments meddle in business and that is considered a norm, so no embarrassment felt there. A pity they know little about business, but in fairness they are very astute getting votes and trying to stay in power.

In that climate you can see why GM wants out. In an effort to get on a profitable footing, GM has to run a gauntlet of political reassurances that any cutbacks will be elsewhere but "not in our backyard". Competition is fierce among mainstream brands and margins are slim.

So leaving will sort the unprofitability. However, Europe is also important to GM for product development expertise and that loss could impact on the company further down the line. How that challenge will be met is unclear. As for economies of scale, I don't think there was enough cost sharing with GM globally anyway, but that is just a feeling on my part.

A new owner will mean fears of cutbacks and aggressive posturing from both German and French governments should leave them safe*. Vauxhall is very important to the Opel/Vauxhall company as the UK is its main market. Any backlash in the UK to a factory closure is unlikely due to self centred apathy and blissful ignorance of most of its people. That said, is it worth the risk?

One can see why GM may want shot of Europe, but it could accelerate the decline of the once mighty GM. The introduction of Korean sourced Chevrolet models into Europe in 2006 and then pulling out less than a decade later shows a shortsighted and impatient side to the company. Hopefully the GM Europe divestment has been well thought out.

*The latter's concern is whether PSA is the preferred buyer.

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