UPDATED: Segula finalizes its outsourcing contract with PSA. Reduced scope!

/ August 30, 2019/ Automotive, France, Germany, M&A (large, with revenues above $50m), PSA, Segula

PSA finalized its outsourcing contract with Segula, almost one year after it was announced. Looking at the details, the scope of the contract is much smaller than expected, with the people transfer initially involving 700 employees, rather than the 2,000 expected. Segula has agreed to take over the new engineers and guaranteed similar wages and benefits, and also purchasing buildings and facilities.

Also, Segula will create an engineering delivery center in Rüsselsheim, where Opel is headquartered, and take over Opel’s testing center in Dudenhofen.

It is hard to comment on the new scope without moving into speculation. We reiterate that buying captives as part of outsourcing contracts can be risky: very often, the wages and benefits of the transferred employees do not match market prices. Also, in this case, Segula will need to quickly create a commercial culture within its Opel teams and diversify its client base in Germany. The deal also occurs in a rather complex macroeconomic environment with German OEMs and suppliers suffering. In short, Segula is making a bold move with this transaction and probably decided to de-risk it a bit by taking over less engineers than initially envisioned.

UPDATED: We are learning that only 700 Opel engineers decided to accept the job offer from Segual and that the remaining 1,300 decided to leave Opel.

In parallel, PSA needs to keep its Open R&D team busy. The R&D center in Rüsselsheim will continue developing new vehicles for the Opel and Vauxhall brands, and also across the PSA brands, new light commercial vehicles, and oil-based passenger cars.

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