A couple of months back, PSA Group finalized its purchase of the Opel brand from GM, for around €1.3 billion. Now, after becoming more familiar with Opel’s internal operations, PSA Group is seeking around half of what it paid to be refunded. The problem? Opel’s carbon emissions reduction efforts were far worse than was disclosed. That’s according to unnamed sources cited by Reuters.
PSA Group reportedly believes that GM intentionally misrepresented the challenges facing Opel and its emissions trajectory. Despite earlier expectations that Opel was on track to miss CO2 reductions targets by “just” 3.7 grams, the brand is reportedly on track to miss by over 10 grams, which would relate to a European Union fine of around €1 billion, going on PSA sources.
This increased gap was partly the result of GM forecasting unrealistically high diesel car sales (despite the ongoing diesel car scandals) and partly the result of extreme reliance on the Opel Ampera-e as a sort of compliance car. The Opel Ampera-e, you see, was being sold at a loss of almost €10,000 per car — hence the reason for freezing sales in Norway and increasing the price.
“Their technical solution was economically unviable and would have led to enormous losses,” one of the unnamed sources was quoted as saying. “So, the first thing you do is drop that (product) line, but then the fleet emissions explode.”
“People who had worked on the closing realized quite quickly that there were these big discrepancies,” another one noted. “They had been swept under the rug.”
Reuters provides more: “PSA, which completed the acquisition in late July, said earlier this month it will need to move Opel models onto its own more fuel-efficient technology faster than planned, in order to cut carbon dioxide emissions before new EU limits are phased in from 2020–21, backed by hefty penalties.
“The companies have discussed the grievances raised by PSA, which has yet to initiate a formal claim, sources close to both manufacturers said. … The acquisition deal, published in GM regulatory filings, provides for compensation payments if either party has been misled. Claims not settled by negotiation are referred for arbitration. For tax purposes, a GM payment to PSA would be treated as a deduction from the purchase price.”
As a result of the “challenges” identified at Opel, PSA Group is now rushing out plug-in all-electric and hybrid versions of the Opel Corsa, Crossland X, and Grandland X — which weren’t expected to be electrified so quickly, going on the company plan unveiled earlier this year.
Apparently, essentially the whole Opel lineup will now be redeveloped with PSA Group engines and architectures by as soon as 2024 — 3 or some years earlier than first planned.
The rush job is seemingly necessary because, without it, the fines set to be imposed on PSA Group beginning in 2021 in Europe would be crippling. Beginning in 2021 in the European Union, you see, auto manufacturers will be expected to meet a fleet carbon emissions limit average of just 95 grams per kilometer (down from 130 grams today). Those that don’t meet this limit will be subject to a fine of €95 per vehicle per excess gram of carbon dioxide emitted — hence the rush amongst European auto manufacturers in recent times to go electric.
It’s noteworthy, though, that if the European Union’s vehicle emissions testing protocols weren’t such a farce, essentially no major auto manufacturers in Europe would be able to meet the new limits.
To close things up here, I’ll leave you with some quotes from PSA Group CEO Carlos Tavares on the subject, which were made earlier this month: “We became aware a few weeks after we finalized the closing that the company was going to the wall on CO2 emissions.
“We put our teams to work to completely rebuild the product and technology strategies. If you fail to comply (with EU rules), the weight of fines you are hit with can threaten the company’s existence.”
It’s a strong incentive to attempt to get a partial refund, it would seem. It’s not clear yet, though, how effective the attempt will be — GM, after all, isn’t going to want to part with such a large chunk of change and can likely claim (we presume) that all the assumptions were presented before the sale.
On a related note, the comments concerning the Opel Ampera-e being sold at a loss of nearly €10,000 was a bit surprising, and makes one wonder about the reasons for the much higher loss margin than the Chevy Bolt EV is reportedly facing. Perhaps this is — yet again — a matter of counting R&D costs and somewhat disingenuously not acknowledging that those costs diminish and eventually go away as more units are sold? This has long been a tool to batter the “high cost” of brand new electric models.
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