To hear the chiefs of General Motors and Peugeot SA tell it, the sale of GM’s Opel and Vauxhall brands and operations in Europe to the struggling France-based automotive giant will create major wins on both sides of the transaction.
GM can now exit a market where it has struggled for decades and free up resources for bigger corporate priorities, while PSA becomes the second-biggest player in the European auto market with a real opportunity to buttress four brands around national identities at a time that nationalism is burgeoning there.
The development riveted attention on the dynamic European auto industry hierarchy on the kickoff of the Geneva Motor Show, an annual highlight of the car calendar on the continent where Peugeot won car of the year this year. Opel is scheduled to reveal its 2018 Insignia Grand Sport and Sports Tourer models on Tuesday at the show.
— Peugeot Sport (@peugeotsport) March 6, 2017
GM on Monday confirmed it had agreed to sell its European operations to Peugeot/Citroen parent PSA Group for about $1.4 billion in cash and stock warrants, and to sell its financial operations in Europe jointly to Peugeot and BNP Paribas for another $800 million.
That’ll cost GM an accounting charge of at least $4 billion and will remove the auto giant from a market where it has been a factor for nearly a century—but where it hasn’t made money in 20 years. The loss of about 11 percent of its global automotive sales will leave GM as the only one of the world’s top five automakers, by sales, that isn’t a player in Europe.
“This was a difficult decision for General Motors,” Barra said in a statement. “But we are unified in our belief that it was the right one.” She added: “The key to our future momentum is agility and speed. This requires prioritization about where we put resources.”
Rebecca Lindland, analyst for Kelley Blue Book, agreed with the move. “Opel/Vauxhall was a profit-losing puzzle no one at GM could solve for decades, and outside forces such as Brexit and an increasingly complex regulatory environment did not help the situation.”
Instead, the deal will free up about $2 billion in cash that GM plans to use to intensify vehicle development in the highly competitive North American and Chinese auto makers and to accelerate its rollout of technologies for the self-driving environment that many believe will determine the industry’s future.
For its part, Peugeot PSA will leap to a No. 2 share of the European car market of 16 percent, putting it ahead of French rival Renault SA but still behind Volkswagen AG’s 24 percent. The deal becomes the signal achievement so far of CEO Carlos Tavares, who left Renault, where he was the right-hand man of CEO Carlos Ghosn, in 2013 to head up PSA.
Tavares will have to cut costs but insisted he doesn’t have to shut down plants under the new deal. His focus is to retain Opel as a German brand within Peugeot and at the same time build up Vauxhall as a UK-based brand as well as the French identities of PSA’s Citroen and Peugeot brands. In a Europe that is increasingly politically atomized along national lines, Tavares has figured, this might be a good play.
“We want to create a European automotive champion,” Tavares said. “We will totally unleash the potential of the Opel and Vauxhall brands.”