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Vauxhall and Opel acquisition: the role of Lean

acquisition

March 7, 2017

The acquisition of Vauxhall and Opel by Groupe PSA from General Motors for €2.2bn will make the Peugeot and Citroën owner the second-largest carmaker in Europe.  Furthermore, given the mid-Brexit timing of the deal and the considerable challenge of turning around the loss-making division, there is a lot riding on its success. However, reading between the lines of the press reports I am encouraged to see signs of a Lean strategy coming into play, which (in my view) will be key to the success or failure of the acquisition.

PSA was facing bankruptcy in 2014 but chair Carlos Tavares has overseen an impressive turnaround. With concerns about job losses mounting both in the UK and in Germany though, Tavares has been quick to point out that he hasn’t closed any factories since taking the helm. He claims to “trust the talents of people. They always come up with ideas and solutions we could not imagine … Shutting down plants is rather simplistic.”

This focus on human capital, and the contribution employees can make when given the opportunity, it vital for success in both Lean and mergers and acquisitions. It’s my belief that the shared high failure rate of both these corporate initiatives can most often be traced back to ‘people problems’ such as culture clashes, lack of collaboration and an unwillingness to change.

The process of staff engagement during an acquisition is vital, but challenging to get right. The sooner you can begin to communicate with all levels of the organisation, the better, but due to commercial sensitivities it is inevitable that the news will come as a surprise to many workers.

Now that the deal is public, both companies need to be fast-tracking their internal communications programme to reassure and engage employees, particularly those who are already voicing their worries about job cuts. Once workers start to hunker down and go into self-protection mode, you’re already on the back foot. Both organisations need to be working together from the outset of the integration process, with an even-handed approach to collaboration and future planning.

Tavares has spoken of staff in all areas of the business being “given an opportunity to hit productivity targets set for employees within the enlarged PSA Group”, adding that “a European benchmarking system will be introduced across the company against which workers can compare themselves….They are going to be able to build themselves a road map to get as close as possible to the internal benchmark that we are now creating.”

While I welcome the drawing up of shared goals and instigation of productivity improvements, I would caution against using the language of ‘them and us’.  Collaboration by consent rather than imposition is a far more effective way to drive up standards, so I would recommend bringing in a ‘critical friend’ in the form of a Lean consultant or independent advisor to facilitate a shared process of benchmarking and improvement mapping.

Securing impartial assistance from a trained, experienced third party can be invaluable during the integration of two firms. The fact that they are independent and not aligned to either of the organisations enables them to break down barriers more effectively, ask challenging questions and ensure that everyone’s focus remains on what matters rather than getting distracted by minor concerns.

PSA has ambitions to return Opel and Vauxhall to profit by 2026, expecting to make savings of £1.47bn each year by then, with most of those cuts made by 2020. It remains to be seen how these will be achieved but many commentators believe that job losses are inevitable. Given that it would be cheaper for the firm to shed jobs in the UK than in Germany, this remains a concern in the long-term, but in the short-term there are signs that efficiencies will be sought elsewhere, such as in purchasing and manufacturing.

It is likely that the company will have planned a series of Lean ‘quick wins’ to kick-start the efficiency drive which will reassure employees and investors alike. In any Lean programme, it’s important to build momentum in the first 100 days by achieving short-term goals to boost morale and demonstrate the effectiveness of the new regime. Particularly when you’re trying to amalgamate two different corporate cultures after an acquisition, the focus needs to be on joining forces to bring about positive change which benefits everyone.

While the UK car market is in strong growth, with Brexit negotiations not even underway yet and President Trump’s ‘America First’ ideology, it’s a long road ahead for Groupe PSA as it seeks to revitalise Opel and Vauxhall in Europe and beyond. Here’s hoping that the positive words from Mr Tavares are borne out by his actions; I, for one, will be watching with interest as this acquisition unfolds.

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