GM’s Vauxhall and Opel business has been sold to the PSA Group for €2.2 billion.
The move, announced simultaneously in Detroit and Paris, will create the second largest automotive company in Europe behind Volkswagen, with a 17% market share and comprising the DS, Citroen, Peugeot, Vauxhall and Opel brands.
Announcing the deal, PSA chairman Carlos Tavares said: “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 respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalising on their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.”
“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees.”
The deal will bring an end to General Motors’ involvement in Europe (apart from selling a handful of Camaro and Corvette muscle cars). The European arm has failed to make a profit since 1999, and has racked up more than $8bn in losses since 2010 alone due to currency fluctuations and falling sales driven by increased competition from both premium and budget brands.
However, there is intense speculation about the future of certain aspects of the GM Europe business, notably Vauxhall. Unions in Germany and Britain are seeking assurances that there will not be widespread plant closures and job losses.
The new company is expected to generate substantial economies of scale in areas of purchasing, manufacturing and R&D. Annual synergies of €1.7bn are expected by 2026 – of which a significant part is expected to be delivered by 2020.
GM’s chairman and CEO, Mary Barra, added: “We are very pleased that together, GM, our valued colleagues at Opel/Vauxhall and PSA have created a new opportunity to enhance the long-term performance of our respective companies by building on the success of our prior alliance.
“For GM, this represents another major step in the on-going 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 and in new technologies that are enabling us to lead the future of personal mobility.
“We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects.”
As part of the deal, PSA will acquire GM Financial’s European operations through a newly formed 50%/50% joint venture with the French bank BNP Paribas that will retain GM Financial’s current European platform and team.
There had been speculation that the deal may flounder due to a black hole in the GM Europe pension fund, estimated at around $8bn. However, all of Opel/Vauxhall’s European and UK pension plans will remain with GM in the US. The obligations for the German pensions will be transferred to PSA. GM will pay PSA €3bn for full settlement of transferred pension obligations.
The takeover is subject to various conditions, including regulatory approvals and reorganisations, and is expected to be completed before the end of 2017.