France’s PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros (£1.9 billion), creating a new European car giant to challenge market leader Volkswagen.
The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, targeting an operating margin of 2 per cent within three years and 6 per cent by 2026 underpinned by 1.7 billion euros in joint cost savings.
PSA shares jumped as much as 5.2 per cent after Chief Executive Carlos Tavares said GM’s European arm could be turned around using lessons from the French group’s own recovery. Opel recently recorded its 16th consecutive full-year loss.
“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” he said.
By acquiring Opel, PSA leapfrogs French rival Renault to become Europe’s second-ranked carmaker by sales, with a 16 per cent market share to VW’s 24 per cent.
The disposal seals GM’s exit from Europe and ends a relationship dating back to the 1920s.
Eight years after coming close to a sale to Canada’s Magna, the Detroit car giant has faced renewed investor pressure to offload the business to raise profitability, rather than chase the global sales crown currently held by VW.
Last year, PSA and GM Europe recorded a combined 72 billion euros in revenue and 4.3 million vehicle deliveries.
GM will receive 1.32 billion euros for the Opel manufacturing business in the form of 650 million euros in cash and 670 million in PSA share warrants.
An additional 900 million euros will be paid by the Paris-based carmaker and BNP Paribas for Opel’s financing arm, to be operated jointly and consolidated by the French bank.
After fending off 2015 merger overtures by Fiat Chrysler with support from her board, GM boss Mary Barra agreed to target a 20 per cent return on invested capital and pay out more cash to shareholders.
“The way I look at this is positioning Opel-Vauxhall to be incredibly successful in the future,” Barra said on Monday when asked by a reporter whether she was relieved. “General Motors doesn’t have to be relieved,” PSA’s Tavares interjected. “They can be proud of giving Opel-Vauxhall a better future.”
The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating PSA’s outright acquisition of Opel, sparking concern over possible job cuts.
Tavares said on Monday the targeted savings would come from purchasing and research and development — avoiding plant closures — as the Opel lineup is redeveloped with PSA technology and vehicle architectures. — Reuters