PSA CEO: Vauxhall plants an opportunity if there is hard Brexit

Not even gleaming, sexy new machines from Ferrari, Lamborghini and Porsche could switch the spotlight at the annual vehicle show from the fall-out from General Motors’ decision to sell its Opel-Vauxhall subsidiary, and the implications of this decision for business in Europe.

France’s PSA Group is set to announce a deal to buy Adam Opel AG from General Motors Co. on Monday after striking an agreement with the US auto maker and winning the blessing of its board for the acquisition. The two automakers also expect to collaborate in the further deployment of electrification technologies and existing supply agreements, and PSA may potentially purchase hydrogen fuel cell systems from the GM/Honda joint venture announced earlier this year. The automaker began to see a turnaround past year but fell behind again after Britain’s vote to leave the European Union caused the pound to steeply drop in value.

“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum”, GM CEO Mary Barra said in a statement.

Labour said the company would need stronger assurances from the government about United Kingdom carmaking after Brexit, despite PSA’s claiming it wants to avoid factory closures and job cuts in the UK. This release will be followed by the release of another 5 new PSA-based Opel models by 2023. PSA plans to bring the experience of elevating its own failing brand just a few years ago to the task.

“The way I look at this is positioning Opel-Vauxhall to be incredibly successful in the future”, Ms. Barra said. With the addition, PSA will have a market share of 17%, the companies said. In the future, GM has the ability to re-enter Europe with new mobility services from Lyft or Maven, GM’s car-sharing service, according to Barra.

General Motors said Monday that it had agreed to sell its Opel and Vauxhall brands to Peugeot in a $2.3 billion deal, exiting a European market that has not produced a profit in almost 20 years. In early 2015, the company stopped production in Thailand and Indonesia and abandoned Russian Federation.

“Opel/Vauxhall was a profit-losing puzzle no one at GM could solve for decades, and outside forces such as Brexit and an increasingly complex regulatory environment did not help”, said Rebecca Lindland of Kelley Blue Book.

Exiting Opel will lead to a non-cash charge of $4bn to $4.5bn for GM. But the executive team appointed to supervise GM as part of its federal bailout rejected the move and Henderson was instead forced out of the company.

Vauxhall employs 4,500 staff between its two major sites – at Ellesmere Port, which makes the Astra, and Luton where the Vivaro van is produced. He said the company would focus on logistics, quality, energy, maintenance and security. “In my discussions with PSA, the chief executive said today that Brexit isn’t an essential driver of this”, he said. He has promised to honor existing agreements between Opel and its workers in Germany and elsewhere in Europe, but most of those will run out in about five years.

PSA executives also held talks with unions before finalizing the deal. Tavares said most savings likely to be achieved by 2020 from purchasing and the estimate did not include any job cuts. She said the company has work to do on some worldwide businesses and could make a similar deal for them if they don’t make enough money.

While the transaction is expected to drop GM from its rank as the world’s third biggest automaker in terms of sales, it could provide the company with $1.4 billion in available cashflow, analysts said.