PSA buys Opel from GM, sets recovery goals

Mark Ross
By Mark Ross
March 6, 2017World News
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PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), the companies said on Monday (March 6), creating a new regional 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 percent within three years and 6 percent by 2026, underpinned by 1.7 billion euros in joint cost savings.

PSA shares jumped 4 percent after Chief Executive Carlos Tavares said GM’s European arm could be turned around using some of the lessons from the French group’s own recovery. GM shares closed 1.2 percent higher on Friday after Reuters reported a deal had been struck.

“We want to create a European automotive champion from the combination of a French and a German company,” Tavares said at a news conference in Paris on Monday (March 6).

By acquiring Opel, PSA leapfrogs French rival Renault to become Europe’s second-ranked carmaker by sales, with a 16 percent market share to VW’s 24 percent.

PSA 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.

PSA reiterated pledges to run Opel as a distinct German subsidiary and honor existing job guarantees to unions, which tend to cover production plans for existing models.

Tavares said exports could help fill Opel plants, adding that UK manufacturing brought opportunities as well as risks in the event of a “hard Brexit” in which Britain leaves the EU without a free-trade deal.

“If it is soft, we are all on performance, making sure that we deliver the performance to be competitive in the UK against all the other regions, all the other countries. In that area may be an opportunity that will be strengthened, eventually, by the weakness of the pound. In any case that will have an impact on the local market but this is already going to happen anyway. If it is a hard Brexit, perhaps then in terms of strategy it is going to be a very nice opportunity to be able to source the UK from the UK,” Tavares said.

The transaction also sees GM retain most of Opel’s pensions deficit, estimated by analysts at $10 billion.

(REUTERS)

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