Peugeot owner PSA to buy lossmaking Opel business for €2.2bn

The French company behind Peugeot and Citroën has agreed to buy General Motors’ lossmaking European arm Opel, including Vauxhall, for €2.2bn (£1.9bn).

Still, the biggest news surrounding the acquisition is that the resulting vehicle giant will become the second-largest automotive company in Europe, with a market share of around 17 percent.

The so-called Brexit vote led to a sharp decline in the value of the pound, undercutting Vauxhall revenues and hiking the cost of imported parts used in its British factories.

Business Secretary Greg Clark said: “Vauxhall has a long history of success in this country and we are determined to see that continue”.

General Motors announced on Monday it is selling its Opel/Vauxhall subsidiary in Europe to France’s PSA Group for $2.2 billion.

However, fears have been raised about what the deal will mean for Vauxhall’s workers in the UK.

PSA’s CEO, Carlos Tavares said that the company is confident that with its support Opel and Vauxhall’s financial turnaround is possible. This apart, the two companies indicated collaboration to develop electrification technologies, as well as, current supply deals for Holden and some Buck models would continue.

“Opel has been making red ink for 10 years, and burning approximately US$1 billion in cash every year”, Tavares said.

The PSA/GM transaction is still subject to regulatory approval, but is expected to close before the end of the year.

GM also will receive warrants to purchase PSA shares that have a nine-year maturity and can be exercised beginning five years after they’re issued.

For the past weeks unions in the United Kingdom and Germany have lobbying PSA and GM on behalf of their respective workforces. This year, for the first time since 2011, the company will pay a dividend.

Europe has failed to make a profit since 1999, and the deal has raised fears of job losses at the Vauxhall factories at Ellesmere Port and Luton, which now employ about 4,500 people.