Deal done? Reports PSA/GM have signed Opel agreement

GM has not turned a full-year profit in Europe since 1999 and since then has lost billions battling high labor costs and an intensely competitive auto sales market.

French automobile group PSA will be buying the Opel and Vauxhall brands of GM as part of the acquisition.

PSA Groupe Chairman Carlos Tavares has been working feverishly since news of a possible deal was confirmed February 14 to convince politicians and union leaders that a combined company will not lead to job cuts.

The UK government has reportedly held talks with both carmakers about the implications of a deal for jobs at the plants.

PSA, together with BNP Paribas, will also acquire all of GM Financial’s European operations through a newly formed 50%/50% joint venture that will retain GM Financial’s current European platform and team.

However, there are concerns for jobs and pensions once existing contracts start to expire in 2021, post-Brexit.

General Motors Co. will keep its manufacturing center in Turin, Italy.

Spokespeople for PSA and Opel declined to comment. Tavares has pulled the French automaker back from brink of bankruptcy over the past three years and now will try to use that same turnaround magic to do what GM couldn’t do for almost two decades – make Opel and Vauxhaull profitable.

For GM, the agreement seems to suggest that Barra chose to focus on profits over market share.

“We’ve done a lot to improve the business but we’re exploring opportunities to see if we can accelerate that even more because scale does matter in this business”, Barra told reporters.

Trade unions representing thousands of workers at Vauxhall factories in Britain said this weekend that they are looking to “engage constructively” with Vauxhall’s new owners.

The combined firm generated €71.bn of revenue and delivered 4.3 million vehicles previous year. GM has recently shown a willingness to pull out of unprofitable regions – it abandoned Russian Federation in 2015 as that country’s economy fell into recession.

The transaction is subject to various closing conditions, including regulatory approvals and reorganizations, and is expected to close before the end of 2017.

The two marques generated revenue of €17.7bn in 2016, meaning the tie up with PSA makes the group the second biggest in Europe behind German rival Volkswagen. The French carmaker also expects savings of up to 2 billion euros ($2.1 billion) from the tie-up, sources have said.