GM Sells European business to PSA Group

In a news release on Monday, General Motors has announced its deal with Peugeot SA Group to sell its car brands Opel and Vauxhall to the French car manufacturer joining Peugeot and Citroen, along with its financial arm in European operations due to continuing profit losses. The deal will value both the car brands and financial arm at a total of $2.3 billion (€2.2 billion).

PSA’s acquisition of GM’s car brands was valued at €1.3 billion and with Opel/Vauxhall at PSA’s portfolio of car brands, the French company will become the second-largest auto company in Europe, behind Volkswagen, with a 17% market share.

Meanwhile, GM Financial’s European business was priced at €0.9 billion, with the acquisition financed by PSA and BNP Paribas.

“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business,” said GM chairman and CEO Mary Barra.

General Motors has finally decided to unload Opel and Vauxhall since the two car brands have failed to generate profitable sales for the past years, leaving the car company struggling with balancing its financials. 

Investors have long suggested offloading the car brands that don’t perform well in the market and focus more in creating more profitable sales.  With PSA’s acquisition, GM is now entirely out of the European auto market.

On the release, GM was happy towards PSA’s acquisition of Opel/Vauxhall as the American company believes that PSA can improve the state of the two car brands, putting them in a stronger position for the long term.

“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround. We intend to manage PSA and Opel/Vauxhall capitalizing on their respective brand identities,” said PSA managing of the board chairman, Carlos Tavares.

However, despite the optimistic tone GM showed on their news release, many still worry over the potential job loss of GM’s UK-based operations, especially with Brexit uncertainties still afloat. GM currently employs an estimated 4,500 individuals on their UK business at Ellesmere Port and Luton plants, and the buyout could potentially affect the jobs of these people. Several analysts believe that since PSA is a French company, it could give priority to giving jobs in France.

Another factor why there is a possibility for PSA to stop operations in the UK is out of making more savings, also due to a weaker pound. Should PSA manufacture out of UK, the British car market might experience trade tariffs in order to import PSA vehicles. And even should the free trade agreements (FTAs) be approved, UK could still see around 10% tariffs.

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