PSA to acquire loss-making Opel/Vauxhall 06 March 2017

French carmaker PSA – which produces Peugeot and Citroen – has agreed to take over General Motors’ (GM) Opel unit in a deal worth 2.2 billion euros ($A3 billion).

This acquisition makes PSA Group second largest auto manufacturer in Europe, behind Volkswagen Group; with a market share of 17 per cent.

She noted Opel-Vauxhall would have broken even in 2016 had it not been for Britain’s decision to leave the European Union, which caused a plunge in the value of the pound. Audi is now one of VW’s most profitable subsidiaries.

THE chairman and chief executive of GM today called the agreement for PSA Group to buy out its European arm a new opportunity to enhance the long-term performance of the respective companies.

A sharp fall in the pound since Britain’s vote to quit the European Union last June sank Opel’s hopes of getting back into the black in 2016, and it ended up reporting a loss of $257 million.

PSA Group and GM announced the transaction in a joint statement in Paris Monday morning. Last year, PSA and GM Europe recorded 72 billion euros in revenue and 4.3 million vehicle deliveries between them. “We continue to engage with them”, said a senior government source, downplaying the role Brexit has played in negotiations. “General Motors is so much better without this”.

Yet it is unlikely that the sale was an easy decision for GM, based in Detroit.GM has long prided itself on its reach to all major automotive markets around the globe.

The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel/Vauxhall, raising worries over 4,500 jobs at the unit’s United Kingdom plants at Luton and Ellesmere Port, particularly in the light of Brexit negotiations.

According to a former United Kingdom business secretary, PSA should pad up to face heavy lobbying from the German government, who will attempt to protect the 35,000 Opel workforce and its plants.

“The way I look at this is positioning Opel-Vauxhall to be incredibly successful in the future”, Ms. Barra said.

PSA believes that adding Opel to its portfolio will improve its annual turnaround by sharing the cost of developing new cars across a wider network and better economies of scale.