PSA Group buys Opel, Vauxhall from General Motors for $2.3 bn; vows turnaround | business-news | Hindustan Times
Today in New Delhi, India
Jun 29, 2017-Thursday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

PSA Group buys Opel, Vauxhall from General Motors for $2.3 bn; vows turnaround

The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, with an operating margin of 2% within three years and 6% by 2026 underpinned by with 1.7 billion euros in joint cost savings.

business Updated: Mar 07, 2017 10:47 IST
PSA Group
Carlos Tavares (L), chairman of the managing board of French carmaker PSA Peugeot Citroen, shakes hands with Mary Barra, chairwoman and CEO of General Motors, before a news conference in Paris, France on Monday. PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion) creating a new regional car giant. (Reuters)

PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), creating a new regional car giant to challenge market leader Volkswagen.

The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, with an operating margin of 2% within three years and 6% by 2026 underpinned by with 1.7 billion euros in joint cost savings.

“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” PSA chief executive Carlos Tavares said in a statement issued by the two carmakers on Monday.

By acquiring Opel, the French group leapfrogs rival Renault to become Europe’s second-ranked carmaker by sales, with a 16% market share to VW’s 24 percent. Last year, PSA and GM Europe recorded 72 billion euros in revenue and 4.3 million vehicle deliveries between them.

GM will receive 1.32 billion euros for the Opel manufacturing business - 650 million euros in cash and 670 million in PSA share warrants.

The Paris-based carmaker and BNP Paribas will pay a further 900 million euros for the Opel financing arm and operate it as a joint venture, fully consolidated by the French bank.

The sale of Opel seals GM’s exit from Europe. Eight years after coming close to selling Opel to Magna International, the Detroit auto giant has faced investor pressure to offload the business and focus on raising profitability rather than chase the global sales crown currently held by VW.

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.

The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by PSA, sparking concern over possible job cuts.

The transaction also sees GM retain most of Opel’s pensions deficit, estimated by analysts at $10 billion. Earlier in the talks, the U.S. carmaker had sought to offload a larger share of the liabilities, sources have said.

Some smaller pension funds will be transferred to PSA, along with a 3 billion euro payment to cover their full settlement, the companies said on Monday. GM will also take an accounting charge of $4 billion to $4.5 billion in relation to the deal, expected to close in late 2017.