GM in talks to sell European Opel unit to French owner of Peugeot
IN a move that could shake up the global motor vehicle industry, General Motors and French carmaker PSA Group said yesterday they were in talks that could result in PSA buying GM’s European motor operations.
For PSA, owner of the Peugeot, Citroen and DS brands, acquiring GM’s Opel and Vauxhall brands would give it a 16.3% share of the European passenger car market, vaulting it into second place in the region, ahead of French rival Renault and behind Germany’s Volkswagen.
Any deal would have to overcome financial, industrial and political obstacles.
Germany’s industrial union IG Metall fired a warning shot yesterday, saying that if the companies were discussing the sale of Opel without the union’s involvement, that would be an an unprecedented breach of all German and European co-determination rights.
German Economy Minister Brigitte Zypries said it was totally unacceptable that talks took place on French carmaker PSA Group buying GM’s European Opel unit without consulting German works councils or local government.
The French government, which owns 14% of PSA, could support a deal that would help PSA reach critical mass, an economy ministry source said.
The government would give special attention to the impact in terms of jobs and the industrial impact of these initiatives, the source said.
France is in the midst of a heated national election campaign.
A spokesman for the Peugeot family, which holds a matching stake in the carmaker, was not immediately available.
It was not clear what price GM might want for the loss-making European business, or what structure a deal could take.
Both companies cautioned in statements that no deal was certain, but investors cheered the disclosure, sending shares in PSA up 3.7% and boosting GM shares by 3.5% in early New York trading.
Shares in Fiat Chrysler Automobiles rose 3.9% as investors speculated that one consolidation play could lead to another.
Fiat Chrysler chief executive Sergio Marchionne has campaigned for more than a year for GM to combine with his company.
For GM, selling Opel would be the most dramatic demonstration yet of chief executive Mary Barra’s strategy of putting profitability and returns on invested capital ahead of market share.
Since taking over as GM’s chief executive in January 2014, Barra has signed off on decisions to quit markets, including Russia and Indonesia, where GM lost money, pull the Chevrolet brand out of Europe, and slash sales to rental car fleets that long propped up US market share with little or no profit. GM’s global market share slipped by 0.3 percentage points last year.
Selling Opel and Vauxhall, which added almost one million cars to its sales, could mean abandoning the global volume race in which it is ranked third behind Volkswagen and Toyota, with just over 10 million vehicles delivered last year.
In 2015, Barra and GM’s board quelled an attempt by an investor group to install representatives on the carmaker’s board by agreeing to return more cash to shareholders, and to target 20% or better returns on invested capital.
GM executives said that measure drives them to put more money into high profit markets, such as trucks and SUVs in the United States, or growth opportunities such as developing autonomous cars for ride services, and less in low-earning businesses.
Last year, GM said its return on capital was 28.9%. Despite delivering robust profits and promising $9billion (R117-billion) in share buybacks between 2015 and this year, GM shares are still trading below the $41 a share level they reached in December 2013, just before Barra took over as chief executive.
GM Europe has been a drag on the carmaker’s global profitability since 1999, the last year Opel and Vauxhall recorded a net profit.
GM restructured its European operations over the past six years, shutting Opel factories in Belgium and Germany and withdrawing the Saab and Chevrolet brands from sale.