An agreement on the sale of GM’s Opel/Vauxhall divisions to French car maker PSA, which includes brands Peugeot and Citroen, was met after several weeks of negotiations. The deal was announced at a joint press conference in Paris last night.
“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,” said Carlos Tavares, chairman of the Managing Board of PSA, in a statement.
“We intend to manage PSA and Opel/Vauxhall, capitalising on their respective brand identities.” He added. “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 Opel/Vauxhall division was valued at just under $2 billion, and GM’s European financial operations were valued at $1.36 billion. The company generated $26.8 billion of revenue in 2016. The acquisition of GM’s European holdings gives PSA a 17 per cent market share of the auto industry in Europe, making them second behind the Volkswagen group on 24 per cent.
The transaction includes all of Opel/Vauxhall’s automotive operations, with the Opel and Vauxhall brands, six assembly plants, five component-manufacturing facilities, one engineering centre in Germany and approximately 40,000 employees. The pension fund shortfall, which hampered discussion last week, has also been met, with GM promising to pay a $4.5 billion settlement.
“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 building on the success of our prior alliance”, said GM CEO Mary Barra.
“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.”
The acquisition of Opel/Vauxhall means lower costs in research and development and manufacturing due to a significant increase in economies of scale. PSA expects Opel/Vauxhall to reach a 2 per cent operating margin in 2020 and will generate operational free cash flow.
The Holden brand was not part of the sale, which only included GM’s European operations, and the joint statement confirmed that existing supply agreements for Holden will continue.
In their own press release, Holden said, “Holden and Opel have had close ties for many years and delivered fantastic vehicles to Australian customers, including the current all-new Astra and the next generation Commodore due in 2018. The good news is these product programs are not affected at all.”