GM buys 7% of PSA, Marchionne plays Dirty Harry with Italy, capacity, capacity, capacity

Lou Ann Hammond, CEO, www.drivingthenation.com, talked to John Batchelor, host of the John Batchelor radio show about the vibe of the 2012 Geneva motor show.

General Motors buys 7% of PSA

Who is PSA?

PSA is formally PSA Puegeot Citroen, the second largest market-share in Europe (behind VW group).

The Peugeot family is the number one shareholder, General Motors second. They will buy parts together, becoming the number one part purchaser in the world. Peugeot also has a banking arm, Banque PSA Finance. PSA owns 57.43% of automotive supplier Faurecia.

There is no “put” in the agreement with PSA, like there was with Fiat. If the deal goes sour, it goes sour without a $2 billion payout, like Fiat received.

PSA alliance – Follow the money

In the United States General Motors Acceptance Corporation, GMAC, now Ally, is well-known in the United States. Many thousands of people have loans through them. There are years that General Motors has been a mortgage company, some a car company, depending on how profitable the two were.

Tim Lee, Opel Supervisory Board, told me that Opel, GM-Europe, does not have straight financing in Europe. Financing is parsed from different financial operations around Europe. Lee said there was a possibility Opel, and GM-Europe, could use Banques PSA Finance for their loans. This would mean that General Motors would own seven percent profit from each loan. Businessweek reported that Banque PSA Finance announced earnings results for the full year ended December 31, 2011. For the year, the company reported revenues of EUR 1,902 million against EUR 1,852 million for the same period a year ago.

Lee also said that General Motors is forecasting five million sales in China, alone, by 2015. How are they going to do this? GM has a partnership with SGMW to make indigenous vehicles for sale, in China.

SGMW is a joint venture between three shareholders, with share capital from two domestic partners “ SAIC Motor Corporation Limited and Liuzhou Wuling Motors Co Limited“ and GM China, which is 49 percent owned by General Motors.

The first vehicle will be the Baojun. The Baojun will be priced under the least expensive Chevy, which runs about $6,000.

The vibe from the 2012 Geneva motor show

The big talk from the Geneva Motor Show is about capacity. How much each car company has the ability to produce, and what to do about the number of union workers that are getting paid for not making cars.

Sound familiar? Like the United States two years ago?

It’s Europe; it’s deja vu all over again.

Marchionne’s second half in Europe

Which brings me back to Fiat – Is Sergio Marchionne looking like Dirty Harry to the Italians?

Go ahead, Italy, make my day!

Europe is awash in red, so Chrysler is keeping Fiat afloat. Marchionne doesn’t think the Italians are acting all so grateful.

Fiat’s unveil of the 500L opened with Clint Eastwood’s “2nd half” commercial, the one that played during Superbowl. You know, the one that said, “second half is just about to begin”

I was talking to Daniel Howes from the Detroit News. He talked to Marchionne before the show and Marchionne told Howes “Fiat will have to do really well in America or make huge cuts in workforce in Europe in order to make a profit. The Italians aren’t happy.

A quote from Howes article; “This machine is ready to take (the headquarters) any time it wants it,” Marchionne, CEO of Fiat and Chrysler, said in a two-hour interview in advance of the Geneva International Motor Show opening here Tuesday. “And if I had no constraints, it would already happen because, unfortunately, the only way to deal with the Italian side is to take Mother Goose outside and say, ‘OK, now I’m a foreign investor in this country. Do you believe this?’ That they would understand.”

Capacity, Capacity, Capacity

Opel is at an average of 80% of capacity, but some of the factories are at 60%. They can’t close the factories without serious repercussions.

The Chevy Cruze is sold in Europe, but made in Korea. How about moving that production over to Europe, where the cars are sold? While everything “is on the table” this doesn’t seem to make sense to GM.

Oh, by the way – Chevy Korea used to be General Motors Daewoo. Chevy is number 3 in marketshare in Korea, behind Hyundai and Korea. But they are gaining, ever since GM Daewoo changed it’s name to Chevy. And Kia and Hyundai are losing Korean marketshare to import brands. Seems like Koreans want something more “exotic” than a domestic. Maybe General Motors should produce the Chevys in Europe, importing them for the exotic sale.

More quote from Howes article;

Labor deal off the table Marchionne isn’t making things look much better. His plan to reinvest in Fiat’s domestic plants in exchange for competitive work rules and labor costs, is off the table ” a fact that augurs well for Chrysler and it’s more competitive union plants in the United States and Canada.

The futures of two Italian plants rest on the shaky launch of Fiat in the States, marred by the fact the company sold barely more than half the targeted 50,000 cars in the first full year. The relaunch of Alfa is shaping up to be a decidedly American event, albeit with Italian flair.

“If we don’t go outside that fence (of Italy) and start looking at the world as an opportunity that you know, we’re going to have to shut down two of the five plants because the argument is that I can’t fill them,” he said. “The only way I can fill them, the only way I can give them a purpose for existence, is by allowing them to export.”

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.