Periodically, the car industry goes through a burst of rationalisation, with companies closing plants and merging or creating alliances. This is typically accompanied by a flood of headlines and stories about the need for structural change, realignment in the industry and so forth. It has happened before and will happen again.

Plant closures can be rationalised (if you will forgive the pun), because most of the older car companies – especially in Europe – have legacy production networks which were established in the days of nationally focused industries. Such a structure does not fit well with the concept of a large single market in Europe and the never-ending search for optimal and cost-efficient production networks.

With President Trump trampling all over vehicle companies’ production strategies in North America and the continued flow of red ink in Europe (compounded by exchange rate losses following the fall in the value of sterling), GM appears to have decided to give up on Europe. Having lost hundreds of millions, billions even, in the last 20 years in Europe (GM last made a meaningful profit in the region in 1999), it is now in serious discussions with PSA about handing over Opel, and of course Vauxhall in the UK. The French government and Chinese company Dongfeng (each with around a 14% stake in PSA) could well be looking at this somewhat askance. Ditto the Peugeot family, with its now much reduced stake, also of around 14%.

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GM reportedly wants a multi-billion dollar or euro settlement for PSA to take on a production network with capacity to make close to 1.5m units a year, depending on shift patterns, but which currently only makes around two-thirds of that at best. PSA appears to want to add another struggling mid-market brand (or two, as Opel and Vauxhall are separate) to go alongside its existing three. True, Citroen has some exciting new models on the way and Peugeot is arguably less staid than it once was, but neither of them, nor the would-be premium brand DS, are exactly tearing up the sales charts. Why does it want to do this, and take on the German unions while risking trouble with their domestic unions, who would rightly see German plants as competitors?

The only plausible explanation is scale – in purchasing and possibly in sharing platform development costs, and ultimately sharing production facilities. But the two companies have been sharing some purchasing functions and logistics for several years, and they are about to start three joint vehicle programmes (two of which are real joint programmes, the third being a rebadging exercise to give Opel a small van), suggesting that shared production facilities can work without a merger. If GM wanted to save on the costs of replacing the Astra it could have approached PSA about sharing the platform underpinning the 308, for example, and carried on as now.

Karl Neumann

Opel CEO Karl Thomas Neumann

But GM wants out of Europe, despite the best efforts of Karl Thomas Neumann, formerly of VW, and the latest CEO charged with sorting out Opel. With the joint vehicle programmes about to start and the production network more efficiently organised in terms of model allocations to specific plants than has been the case for many years, Neumann must have thought he was finally on the right path. And then came Trump – preceded by Brexit and the collapse in sterling, hitting European operations right where it hurts, on the bottom line.

Neumann’s ultimate bosses, Mary Barra and Dan Amman, sitting in Detroit, saw their local strategies imperilled by the new US president and, with the need to divert money into domestic investments and accelerate their own electric vehicle programme becoming pressing, the renewed flow of red ink in Europe was deemed unacceptable. GM has tried, and for various reasons, failed to make a success of Europe. This is not a sudden failing; it has been apparent for many years. The difference now is that company is ready to quit.

For GM, getting rid of Opel and Vauxhall makes a lot of sense. For PSA, acquiring Opel and Vauxhall would bring added scale and a significant uplift in market share, at least in theory. But it will come at a cost and many will ask how PSA will succeed – financially – where GM has failed. When the idea of the two companies co-operating was raised some years back, and when they took cross-shareholdings in each other, one contact of mine likened it to a blind man (PSA) helping a drunk (GM) to cross a busy junction in the dark. Some of PSA’s sight may well have been restored under Carlos Tavares’ clever surgery but, in the meantime, Opel especially has had a skinful, even if GM in the US has been on the wagon. Getting across that junction has become a lot more difficult.