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Opel and Vauxhall target 6% margin in recovery plan

Opel chief executive Michael Lohscheller and PSA Group chief executive, Carlos Tavares (right)

Opel and Vauxhall hopes to avoid plant closures with a new plan which it hopes will return the brands to profitability with a 2% operating margin by 2020 and 6% by 2026.

The brands, bought from former owner General Motors by PSA Group in a £1.9 billion acquisition finalised in August, will offer all its vehicles with a hybrid or fully electric drivetrain by 2024 as is aims to move towards a lower break-even point of 800,000 vehicles per year.

Plant closures will not be necessary according to the plan – dubbed PACE! – which will aim to cut €1.1bn by 2020 and €1.7bn by 2026 but a statement said that there would be “necessary and unavoidable” cuts to labour.

Other efficiencies will be driven by combining manufacturing, research and procurement with its new French owner and a reduction in the number of vehicle platforms used by the brands from their current nine to two, helping reduce its cost per car by €700.

The two Groupe PSA platforms, CMP and EMP2, will lead to an EMP2-based SUV is planned for production in Eisenach from 2019 and an EMP2-based D-segment vehicle to be produced in Rüsselsheim.

Michael Lohscheller, chief executive of Opel Automobile GmbH, said: “PACE! will unleash our full potential.

“This plan is paramount for the company, to protect our employees against headwinds and turn Opel/Vauxhall into a sustainable, profitable, electrified, and global company.

“Our future will be secured and we will contribute with German excellence to the Groupe PSA development. The implementation has already started with all teams eager to achieve the objectives.”

Opel/Vauxhall said in its statement that the plan was designed “with the clear intention to maintain all plants and refrain from forced redundancies in Europe”.

The necessary and sustainable reduction of labour costs shall be reached with thoughtful measures such as innovative working time concepts, voluntary programs or early retirement schemes, it said.

Opel/Vauxhall will switch to Groupe PSA vehicle architectures faster than originally expected.

From 2024 onwards, all Opel/Vauxhall passenger car models will be based on joint Groupe PSA platforms.

Next to come are the Combo in 2018 and the next generation of the bestselling Corsa in 2019.

This course will be steadily continued with one major launch per year.

The brands will launch 9 new models by 2020.

Opel/Vauxhall will launch new models and enter new markets with the clear goal to increase its LCV sales by 25% by 2020 against 2017.

Opel will also look overseas for growth, entering more than 20 new export markets by 2022 before exploring “midterm overseas profitable export opportunities”.

Quoted in the Financial Times, PSA chief executive Carlos Tavares, said that he would not be micromanaging the PACE! plan, but added: “The only thing that protects us in our world, a fast changing world, is performance.”

Arndt Ellinghorst, analyst at Evercore ISI, told the newspaper: “While PSA is a proven cost cutter, Opel’s management team remains unproven in this respect.”

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