General Motors Co. (NYSE:GM) has confirmed the sale of its Opel/Vauxhall European business to French carmaker PSA Group SA for €2.2bn (US$2.3bn), raising worries over the future of 4,500 jobs at the unit’s UK plants
The maker of Peugeot and Citroen cars has vowed to return the Opel and Vauxhall brands to profit, with an operating margin of 2% within three years, and of 6% by 2026, underpinned by €1.7bn in joint cost savings.
In a statement issued by the two carmakers, PSA chief executive Carlos Tavares said: “We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support.”
With the Opel acquisition, the French group leapfrogs rival Renault SA to become Europe’s second-ranked carmaker by sales behind market leader, Germany’s Volkswagen AG.
GM will receive €1.32bn for the Opel manufacturing business – €650mln in cash and €670mln PSA share warrants.
The Paris-based carmaker and French bank BNP Paribas SA will pay a further €900mln for the Opel financing arm and operate it as a joint venture.
The transaction sees GM retain most of Opel’s pensions deficit, estimated by analysts at $10bn.
De-risking balance sheet …
In the joint statement, the US carmaker said: “By immediately improving EBIT-adjusted, EBIT-adjusted margins and adjusted automotive free cash flow and de-risking the balance sheet, the transaction will enable GM to lower the cash balance requirement under its capital allocation framework by US$2bn, which it intends to use to accelerate share repurchases, subject to market conditions.”
GM’s chairman and chief executive officer, Mary T. Barra said: “We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects.”
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 job cuts at the unit’s UK plants at Luton and Ellesmere Port, particularly in the light of Brexit negotiations.
The UK government has reportedly held talks with both carmakers about the implications of a deal for jobs at the plants.
The sale of Opel seals GM’s exit from Europe, eight years after coming close to selling Opel to Canadian automotive supplier Magna International INC. (NYSE:MGA), and having fended off full merger overtures from Fiat Chrysler in 2015.
Story by ProactiveInvestors