PSA buys Opel/Vauxhall from GM in $2.3B Deal

The deal will have General Motors Company selling Opel and Vauxhall to PSA Group for roughly $1.38 billion.

In a joint statement issued by GM and PSA, the addition of Vauxhall and Opel is expected to “allow significant economies of scale and synergies in purchasing”, resulting in savings of 1.7 billion Euros by 2026 and a significant part as early as 2020.

Exiting Opel will lead to a non-cash charge of $4bn to $4.5bn for GM.

With GM’s Opel and Vauxhall, PSA would become Europe’s second largest carmaker, behind Volkswagen but overtaking Renault-Nissan. All of the details of this agreement are expected to be completed by the end of the year.

The transaction involves Opel/Vauxhall’s automotive operations, including six factories, five component manufacturers, one engineering center and about 40,000 employees, all in Europe.

The sale also includes intellectual property licenses from GM until vehicles transition to PSA platforms. General Motors will keep the engineering center in Torino, Italy, which is housing global projects.

But turning Opel and Vauxhall around could prove a challenging feat.

There was a fairly straightforward reason: with market share of less than 7 percent, GM Europe was too small to be run efficiently. Globally, PSA sold 3.5 million cars previous year compared to the Opel/Vauxhall brand’s 0.8 million.

Commenting on the future of the GM pension scheme, Len McCluskey added: “I have sought and have received urgent assurances from the PSA Group and General Motors as to their intentions towards the pensions of the United Kingdom workforce”.

Announced by the bosses of the two companies on Monday, the 2.2 billion euro deal means GM gets rid of a division that has posted losses totaling around 20 billion euros in the last 17 years.

Carlos Tavares, the chairman of the managing board of PSA, said the company will respect the commitments GM made to Opel and Vauxhall employees.

Those seem like a number of big “ifs”, though, especially in light of uncertainties about growth in the economically and politically fragile European market.

“This was a hard decision for General Motors“, Chairman and CEO Mary Barra told a press conference on Monday morning.