PSA Group buys Opel from General Motors

France’s Peugeot group is buying the Opel and Vauxhall brands from General Motors for $US2.2b.

PSA Group and General Motors Co. are set to announce on Monday the purchase of the Opel brand by the French company, creating the region’s second-largest automaker and allowing GM to exit the European market, according to people familiar with the matter.

In a statement released today, the PSA Group said that its takeover of the GM-owned brands – which made €17.7bn worth of revenue previous year – would make the PSA Group the second largest carmaker in Europe. GM will also take non-voting shares in PSA in the form of warrants, bringing the total value to the American industrial giant up past $4 billion. “We see this as a natural extension of our relationship”, he adds.

“For many, many, years Opel Vauxhall could not export cars outside of Europe, that was something that General Motors didn’t want them to do”.

Over the last decade, GM has mainly used Opel as an engineering center for global products.

BNP Paribas, which is also advising PSA Group on the acquisition of Opel, has seen its outstanding auto loans rise to 15 billion euros from 10 billion in 2013. These are the U.S., China, and the EU GM chose to drop out of Europe, as, after years of losses, it could not fix its problems there. With the addition, PSA will have a market share of 17%, the companies said.

After fending off 2015 merger overtures by Fiat Chrysler with support from her board, GM boss Mary Barra agreed to target a 20 percent minimum return on invested capital and pay out more cash to shareholders. Opel was costing GM, a lot, and since theyve now unloaded them, savings should kickstart immediately.

However, with PSA Group factories across Europe now running at such low capacity, it is easy to see how they could easily swallow up the output of the Vauxhall plants in the UK. “We were also in a hard financial position, and we were able to turn around our company”, he said. The transaction is subject to regulatory approvals and reorganisations, and is expected to close before the end of 2017. The group also states that it expects Opel to post an operating profit margin of 2 per cent by 2020 and 6 percent by the year 2026.