When quality standards appeared to slip for Subaru, we asked if perhaps the small but rapidly growing Japanese brand was threatening to “fly too close to the sun.” Since 2008, General Motors has continuously adjusted course to bring its business back to basics and avoid the allure of owning far-reaching—but ultimately unprofitable—brands. The latest departure from GM’s portfolio: Opel and Vauxhall (its entire European operations) have been sold to French conglomerate Groupe PSA, formerly PSA Peugeot Citroën.
Expansion can pay dividends in terms of boosting market share and acquiring new customers, but large, multi-national corporations face a decidedly more challenging set of obstacles. Complex entanglements in vastly different markets can result in a diverse set of revenue streams, but if not managed diligently, they can just as easily provide havens for underperforming divisions, hemorrhaging money from a company’s portfolio.
While Subaru has enjoyed its position atop the small automaker segment, because the company known for reliable all-wheel-drive (AWD) vehicles sells every car it makes, it suffers no need to slash prices or incentivize shoppers as model years draw to a close. General Motors, on the other hand, isn’t as fortunate. Although the Silverado remains one of the best-selling vehicles in the world, that status doesn’t come without some massaging: Currently Chevrolet is loading up Silverados with incentives to compete against the Ford F-150 and Ram 1500.
Similarly, Opel and Vauxhall have sold in large quantities overseas, combining for 1.2 million total sales and $18.7 billion in revenue, but they have also provided a negative cash flow to GM for the past 16 years.
In trimming its product line yet again, GM has outlined a path that will allow it to focus primarily on growth in North America and China, now the world’s largest market with annual sales hovering around 28 million vehicles. Combined with now-available cash resources to pour into transportation-as-a-service technologies like autonomous driving, General Motors aims to transition, long-term, toward being a company with fewer entanglements and larger profits.
Scuttling Opel, in particular, was not a frivolous decision by the executives of General Motors. The brand, unknown to many Americans (save those unlucky enough to have owned a Kadett, Manta, or GT), has been building cars since 1899 and was a part of GM for nearly 80 years.
Of course, one woman’s trash is often another man’s treasure, and that appears to be case here, too. Mary Barra, GM’s CEO, may not see Opel as valuable anymore, but Peugeot CEO Carlos Tavares looks at the acquisition as a road to European dominance for Groupe PSA, which will now sit comfortably as the continent’s second-largest automaker.
Will GM thrive without Opel and Vauxhall? Is Groupe PSA smart to acquire a larger foothold in Europe?
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