Date
29 May 2017
The logos of General Motors' Opel and Peugeot. Acquiring GM's Opel and Vauxhall brands would give PSA a 16.3 percent share of the European passenger car market. Photo: Reuters
The logos of General Motors' Opel and Peugeot. Acquiring GM's Opel and Vauxhall brands would give PSA a 16.3 percent share of the European passenger car market. Photo: Reuters

GM in talks to sell European auto business to Peugeot

General Motors Co. and French automaker PSA Group are in talks that could result in PSA buying GM’s European auto operations, the two companies said.

For PSA, owner of the Peugeot, Citroen and DS brands, acquiring GM’s Opel and Vauxhall brands would give it a 16.3 percent share of the European passenger car market, vaulting it into second place in the region, ahead of French rival Renault SA and behind Germany’s Volkswagen AG, Reuters reports.

Any deal would have to overcome financial, industrial and political obstacles.

Germany’s industrial union IG Metall said if the companies were discussing the sale of Opel without the union’s involvement, that would be an “an unprecedented breach of all German and European co-determination rights”.

German Economy Minister Brigitte Zypries said it was totally unacceptable that talks took place on French carmaker PSA Group buying GM’s European Opel unit without consulting German works councils or local government.

The French government, which owns 14 percent of PSA, could support a deal that would help PSA reach “critical mass”, an economy ministry source told Reuters.

The government will “give special attention to the impact in terms of jobs and the industrial impact of these initiatives”, the source said. France is in the midst of a heated national election campaign.

It was not clear what price GM might want for the loss-making European business, or what structure a deal could take.

Both companies cautioned in statements that no deal is certain, but investors cheered the disclosure, sending shares in PSA, owner of the Peugeot and Citroen brands, up 3.7 percent and boosting GM shares by 3.5 percent in early New York trading.

Shares in Fiat Chrysler Automobiles NV rose 3.9 percent as investors speculated that one consolidation play could lead to another.

Fiat Chrysler chief executive Sergio Marchionne has campaigned for more than a year for GM to combine with his company.

For GM, selling Opel would be the most dramatic demonstration yet of chief executive Mary Barra’s strategy of putting profitability and returns on invested capital ahead of market share.

Since taking over as GM’s CEO in January 2014, Barra has signed off on decisions to quit markets, including Russia and Indonesia, where GM lost money, pull the Chevrolet brand out of Europe, and slash sales to rental car fleets that long propped up U.S. market share with little or no profit.

GM’s global market share slipped by 0.3 percentage points last year.

Selling Opel and Vauxhall, which added almost 1 million cars to its sales, could mean abandoning the global volume race in which it is currently ranked third behind Volkswagen and Toyota Motor Corp., with just over 10 million vehicles delivered last year.

GM and PSA have already shared production of commercial vans and developed common vehicle platforms, a relic of their last attempt to forge a broader alliance, which was unwound in 2013 with the sale of the US carmaker’s stake in PSA.

Selling Opel would free up GM to invest more to develop vehicles for the North American and Chinese markets, where it makes nearly all of its automotive profits, as well as to expand new businesses.

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CG

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