Possible Opel deal explored by PSA
FRANKFURT — France’s PSA Group, maker of Peugeot and Citroen cars, says it’s exploring a possible takeover of Opel, General Motors’ money-losing European business.
Cutting Opel loose could mean a solution to GM’s long-running drama over losses in Europe — but the Detroit-based automaker cautioned that a deal wasn’t a sure thing.
PSA Group said in a statement Tuesday that it was considering “numerous strategic initiatives” that would expand the existing cooperation between the two companies, and that a takeover of Opel was one of them. PSA Group and GM are already involved in several joint projects in Europe. GM acknowledged the talks and cautioned that “there can be no assurance that an agreement will be reached.”
Combing PSA Group with Opel and its British brand Vauxhall would create the second-largest carmaker by market share in Europe, with 16.6 per cent of sales according to 2016 figures. The combination would be second only to Volkswagen, with 23.9 per cent, and would vault ahead of the Renault-Nissan alliance, which had 13.9 per cent.
Analysts Philippe Houchois and Ashik Kurian at research firm Jefferies International say in a report that “ongoing market concerns for PSA and GM have been lack of scale, which this combination would help to address.”
Being bigger can in theory bring per-vehicle cost advantages by spreading fixed costs such as investment in plants and equipment over a larger number of vehicles.
GM last made a full-year pretax profit in Europe in 1999. Since leaving bankruptcy protection in 2009, GM has lost $5.88 billion before taxes on European operations, according to government regulatory filings.
It had hoped to reach break-even by now, but last year posted a loss of $257 million for the year even as GM as a whole turned in a robust profit of $9.4 billion.
Opel has struggled to control costs due to stronger worker protections in Europe that make it harder to adjust production capacity to demand than in the U.S. or other locations. Opel and Vauxhall also face tough competition for sales of less profitable mass-market vehicles.