Reports today of GM taking a 7% stake in PSA aren’t bad news in the long-term. GM has a great reputation for petrol engine development, and needs to focus its products in Eur. PSA has great product and top class diesel, but lacks scale. But the real sticking point remains: Too much capacity in Europe! Any credible PSA/GM plan would need:
- Aulnay — already fully expected that PSA will announce the closure post April election in France.Rumors of this closing have drawn virulent protest for the past year or more. If not, I am suspect on PSA “recovery”
- Ellesmere Port (UK), the UK government has drawn a line in the sand to keep GM’s two plants open. British politicians and labor successfully lobbied to stay open during GM’s tumultuous 2009 restructuring of Opel, and are already mobilizing.
- Bochum (North Rhine-Westphalia, Germany): This one is not so easy. The German auto market has been strong, and the German public has been pushed far in recent months with labor gearing up again to pressure politicians in the
The GM/PSA saga adds fuel to comments from Sergio Marchionne when he stated that a failed US Alpha Romeo launch and lack of recovery in Europe would force him to close 2 more plants in Italy. After the violent protest in the Termini (Sicily) closure, trying to close 2 more would be explosive to say the least as Italy struggles with public austerity. The likely targets:
- Miafiori: Turin
- Cassino in central Italy
It’s never a good time to cut capacity, but Europe is on the brink. The current capacity load has taken PSA to its knees and Fiat would not be far behind were it not for the temporary relief from Chrysler (and we believe the shelf-life on that may be coming.)
Comment: Without capacity reduction, GM/PSA and or any other “tie-ups” are band-aids, not a cure. All of these combined would reduce W Eur capacity by about 1 million units, about an 8% reduction, just a touch over the expected market decline forecast for 2012, setting lower fixed cost base for an eventual rebound. It’s election time in Europe, so don’t expect any hard news prior to polls closing, but look action once the votes are counted.
Recent other plant closures in Europe: Mitsubishi’s Born (Netherlands) is slated to shut down by year-end. Volvo’s Uddevalla (Sweden) lines are expected to stop production by end of next year. And of course Saab’s Trollhattan (Sweden) lines closed last month under bankruptcy.