Horizontal Integration On the Way for the Car Industry as a Major Takeover Emerges

The European car industry looks like it is set for some consolidation with the news that Peugeot in talks to buy GM's Vauxhall and Opel businesses.

This potential takeover would be scrutinised carefully by the European and UK competition authorities. However there is no obvious reason at the moment why it might be blocked. The resulting larger carmaker would have around 16% of the total European automotive market, the second largest market share behind the market leader VW.

Economies of scale and productive efficiency seem to be the main strategic drivers behind the proposed takeover.

Opel (which includes the UK's Vauxhall brand) is still loss-making despite a recent financial bail-out and cost-cutting programme. The scope for cost synergies from the takeover would be significant.

One to watch - a classic example of a horizontal integration takeover.