After a bit of haggling, the deal is done: PSA Group, the French parent of Peugeot, will pay a total of $2.3 billion for General Motors’ German-based Opel operation and its sister brand, Vauxhall, which is based in the U.K. The deal, which is subject to regulatory approvals, is expected to close by the end of 2017, according to the release announcing the transaction this morning.
“The agreement comes after months of negotiations between the two carmakers that have occasionally stumbled over the issue of Opel’s pension deficit and the ability of PSA to use GM’s electric car technology,” writes Michael Stothard for Financial Times.
“GM will retain most of Opel’s pensions deficit, estimated by analysts at as much as $10 billion, despite efforts by GM earlier in the talks to load it on to PSA,” Stothard reports. And Opel/Vauxhall “will also continue to benefit from intellectual property licenses from GM until its vehicles progressively convert to PSA platforms ‘over the coming years.’”
“Opel’s sale leaves GM with nearly no presence in the world’s third-largest vehicle market, which was the industry’s birthplace and a focal point for automotive design,” report Nick Kostov and Eric Sylvers for the Wall Street Journal.
“GM unsuccessfully tried to establish Chevrolet in Europe before largely exiting the market in recent years. It still sells some higher-end Chevy sports cars there, but in small numbers. It isn’t likely to renew a push to build on Chevy sales soon because of the high cost of establishing a brand in such a competitive market, according to two people with knowledge of the company’s thinking.”
On the positive side, “Selling Opel and Vauxhall frees GM from a division that has bled money for 16 consecutive years, allowing the Detroit automaker to spend more time and money developing cars and trucks in North America and China where it is earning most of its profits and on the development off self-driving cars,” Brent Snavely observes for the Detroit Free Press.
GM bought Vauxhall in 1925 and has owned Opel since 1929. The headline of a Reuters timeline tracing Opel’s origins as a sewing machine workshop set up in the western German town of Russelsheim by Adam Opel in 1863 reads: “GM falls out of love with Opel, sells it to Peugeot.”
But “GM chairman and chief executive Mary Barra said it was a difficult decision to sell Opel and Vauxhall, and insisted the business would have broken even in 2016 had it not been for the U.K.'s decision to leave the European Union, which caused a sharp drop in the value of the pound,” the BBC points out.
“They’ve significantly strengthened their brands, brought outstanding cars to the market and made important advancements in technology. Their financial results have improved dramatically,” Barra said.
“But she added: ‘key fundamental shifts in the European market during the past 12 months from changes in customer preferences to geopolitical and regulatory environments to the impact of technology’ meant the company had to make ‘thoughtful and disciplined decision making about our future,’” the Financial Times’ John Murray Brown reports.
Indeed, “turning a French carmaker and its German rival into a global auto giant would be tough under any circumstances,” writes Jack Ewing for the New York Times. But this deal “has the added complexity of politics” — particularly the wave of nationalistic fervor that is in play in many countries.
“Politicians have become acutely aware of how corporate decisions can create the resentments toward immigration and globalization that fed Donald J. Trump’s rise in the United States, contributed to Britain’s vote last year to leave the European Union, and nourished far-right politicians in France and Germany.”
PSA CEO Carlos Tavares, “who turned around the maker of Peugeot and Citroen vehicles following a bailout in 2014, is bolstering his defenses in a peaking market that’s being transformed by technology, new competitors and Brexit,” observes Ania Nussbaum for Bloomberg.
“‘It gives us the opportunity to become a real European champion,’ Tavares said after announcing the deal, which reinstates PSA as the region’s second-biggest auto manufacturer. ‘Our plan is to build a common future for Opel and Vauxhall and fix the existing issues.’”
And, if all goes in the direction he expects it to go, no factories will close and no jobs will be lost.
Tavares “talked of creating a ‘European champion,’” writes Julia Kollewe for the Guardian. “He pointed to the French company’s track record and said employees at Vauxhall in the U.K. and Opel in Germany would be given a chance to reach the necessary ‘benchmark’ of efficiency.
“GM and PSA said the deal would create annual savings of $1.7 billion in purchasing, manufacturing, and research and development (R&D) by 2026, with most savings likely to be achieved by 2020 from purchasing,” Kollewe continues.