PSA in €2.2bn GM Opel purchase
THE PSA Group yesterday completed the acquisition of General Motors’s money-losing European division, kicking off one of the motor industry’s most complex turnaround efforts amid mounting political pressure to tighten emissions rules in the region.
Michael Lohscheller, the new chief executive of the unit comprising the Opel and Vauxhall brands, will present a business plan in 100 days, the Parisbased PSA said in a statement.
“We are witnessing the birth of a true European champion today,” PSA chief executive Carlos Tavares said in a separate release. The deal will reinstate PSA, the maker of Peugeot, Citroen and DS (Distinctive Series) cars, as Europe’s second-biggest vehicle manufacturer by sales.
“Picking up GM’s 1.2 million annual deliveries in Europe allows the French company to spread the cost of developing new vehicles across a larger production network. Gaining scale is vital for mass carmakers as they try to stay ahead of self-driving and electric-vehicle innovations, while Silicon valley firms like Apple and Uber Technologies plot inroads into the industry.
Car-makers are also facing spending pressure as regulators crack down on diesel emissions.
GM is selling Ruesselsheim, Germany-based Opel, its UK sister brand Vauxhall and their car-financing operations for 2.2 billion (R34.5bn). The Detroit-based car maker said in June it anticipated a charge of about $5.5 billion (R73bn) at the deal’s closing.
Tavares will need to replicate a turnaround at Opel that he achieved with PSA three years ago, though he has yet to specify any cutbacks along the lines of the French manufacturer’s measures. PSA reaffirmed its commitments to Opel labour agreements and the German company’s plans to bring out a new sport utility vehicle at the end of the decade.
PSA reiterated goals yesterday for annual savings from the Opel deal of 1.7bn by 2026 through shared-development costs, factory investments and purchasing. Operating profit margins are targeted at 2 percent of revenue by 2020 and 6 percent by 2026 for the former GM business, it said.
Over half of Opel vehicles will be made on common technology platforms by 2019.
Shares of PSA rose 0.4 percent to 18.27 in Paris. The stock has gained 18 percent this year, counter to a 2.4 percent decline in the Stoxx 600 Automobiles & Parts Index.
French competitor Renault SA overtook PSA last year as Europe’s second-biggest carmaker by sales, while Opel and Vauxhall ranked sixth.
The combined market share of PSA and the GM businesses in the first half of 2017 was 16.2 percent, down from 17 percent a year earlier, amid pressure from Renault and Fiat Chrysler Automobiles. Volkswagen remains the dominant car-maker at 23.4 percent of the market, industry data showed.
GM, which has owned Opel for almost 90 years, pulled the plug after the division missed a target to break even in 2016, contributing to losses that have totalled about $9bn since 2009.
The US manufacturer is on the hook for much of Opel’s pension obligations and will pay PSA 3bn to settle some retirement plans. Still, the deal will free up about $2bn cash, which GM plans to use for share buybacks.
PSA is paying GM 1.13bn cash and 650m of warrants. It’s acquiring the financing unit in a joint venture with BNP Paribas, which will provide the remaining 460m. – Bloomberg